Naser Khiabani; shaghayegh shajari
Abstract
Housing price swings have always been under the spotlight for policy-makers and academics. Financial accelerator mechanism (developed by Bernanke and Gertler, 1999) can provide some explanation to these fluctuations. With focusing on the concept of financial accelerator, this paper sheds light on the ...
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Housing price swings have always been under the spotlight for policy-makers and academics. Financial accelerator mechanism (developed by Bernanke and Gertler, 1999) can provide some explanation to these fluctuations. With focusing on the concept of financial accelerator, this paper sheds light on the long- and short-run correlation of housing prices and credit in Iran. We applied a Structural Vector Error Correction Model (SVECM) to housing and credit market over period 1988q2-2015q1. Our findings confirm the existence of a cointegrated relationship between credit and housing prices. In a long-run perspective, the causation goes from credit to housing prices. However, in the short-run we find an existence of contemporaneous bi-directional dependence between housing prices and credit. In general, we find the evidence of housing collateral effect in housing and credit markets in Iran. However, this role is small and limited compared to the same role in countries with developed financial and mortgage markets.
Somayeh Shahhoseini; Javid Bahrami
Abstract
Empirical evidence about recent financial crisis revealed the prominent role of financial sector in transmission of different shocks to the real sector of economy. Due to the importance of banking sector behavior during business cycles and for the purpose of explaining the credit channel of monetary ...
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Empirical evidence about recent financial crisis revealed the prominent role of financial sector in transmission of different shocks to the real sector of economy. Due to the importance of banking sector behavior during business cycles and for the purpose of explaining the credit channel of monetary transmission mechanism in the economic literature, analyzing the role of banking sector during business cycles in Iran can help us to better understand how the shocks can have impacts on the economy. In this paper, we evaluated macroeconomic fluctuations and monetary transmission channels in Iranian economy using a standard New Keynesian dynamic stochastic general equilibrium model that includes banking sector. The results of the study show that inclusion of banking sector in a DSGE model can improve evaluation of macroeconomic fluctuations. Also, the results of simulation show that variables related to banking sector have pro-cyclical movements in Iranian economy and these results provided enough room to explain the role of banks as financial accelerator and monetary transmission channels in Iranian economy.
