The Interaction of Housing Price and Credit: Some Evidence from Iran

Khiabani, Naser; Shajari, Shaghayegh

doi:10.22054/joer.2018.9828

Document Type : Research Paper

Authors

Naser Khiabani ¹
shaghayegh shajari ²

¹ Associate Professor, Faculty of Economics, Allameh Tabataba'i University, Tehran

² Ph.D. Candidate in Financial Economics, Faculty of Economics, Allameh Tabataba'i University, Tehran

https://doi.org/10.22054/joer.2018.9828

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 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.

Keywords

References

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Economics Research

The Interaction of Housing Price and Credit: Some Evidence from Iran

References

References

Poterba, JM (1984), “Tax Subsidies to Owner-occupied Housing: An Asset-market Approach”, The quarterly journal of economics, Vol: 99, No: 4, PP. 729-752.

Lacoviello, M. (2005), “House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle”, American Economic Review, 95(3), PP. 739-764.

Rampini A. and Viswanathan, S. (2010), “Collateral, Risk Management, and the Distribution of Debt Capacity”, the Journal of Finance ,65(6), PP. 21-24.

Turk, R. (2015), “Housing Price and Household debt Interaction in Sweden”, IMF working paper, 15/276+ 643 ، فصلنامه روند ، شماره هیان ردار له برآورد شده در جد یک مدل .

Valverde, S and Fernandez, F. (2010), “The Relationship between Mortgage Markets and House Prices: Does Financial Instability Make the Difference?”, CenFIS Working Paper, No:10-02, PP. 3-6.

Volume 18, Issue 71
January 2019
Pages 21-52

The Interaction of Housing Price and Credit: Some Evidence from Iran

References

References

Poterba, JM (1984), “Tax Subsidies to Owner-occupied Housing: An Asset-market Approach”, The quarterly journal of economics, Vol: 99, No: 4, PP. 729-752.

Lacoviello, M. (2005), “House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle”, American Economic Review, 95(3), PP. 739-764.

Rampini A. and Viswanathan, S. (2010), “Collateral, Risk Management, and the Distribution of Debt Capacity”, the Journal of Finance ,65(6), PP. 21-24.

Turk, R. (2015), “Housing Price and Household debt Interaction in Sweden”, IMF working paper, 15/276+ 643 ، فصلنامه روند ، شماره هیان ردار له برآورد شده در جد یک مدل .

Valverde, S and Fernandez, F. (2010), “The Relationship between Mortgage Markets and House Prices: Does Financial Instability Make the Difference?”, CenFIS Working Paper, No:10-02, PP. 3-6.

Volume 18, Issue 71January 2019Pages 21-52

Volume 18, Issue 71
January 2019
Pages 21-52