Modeling real estate price volatility in Jordan: macroeconomic and energy price effects using an EGARCH model

Purpose The purpose of this study is to analyze the dynamics of the Jordanian real estate price index volatility over the period 2005–2021 and determine the influence of Gross Domestic Product (GDP) growth, interest rates and energy prices on price fluctuations in the real estate market. Design/methodology/approach To estimate real estate price volatility, the authors use the quarterly data and the exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model. Findings The results indicate a significant positive relationship between GDP growth and real estate returns. Conversely, interest rates exhibit a negative impact. Energy prices negatively affect real estate returns, dampening housing demand. The study identifies pronounced volatility clustering and leverage effects, where negative shocks exert stronger influences on volatility than positive shocks of equivalent magnitude. Research limitations/implications The study is limited by the use of data for one country. The analysis takes into account a limited set of macroeconomic variables. Practical implications The results of the study have important implications for economic policy and financial regulation. They point to the need to use macroprudential instruments to mitigate systemic risks in the real estate market, including countercyclical capital buffers, loan-to-value limits and debt-to-income ratios. Social implications Real estate market stability has a direct impact on household well-being and housing affordability. Originality/value The originality of this study lies in its comprehensive analysis of house price index volatility in Jordan using the EGARCH model, including energy prices.