Investigating the impact of oil and currency price shocks on housing price changes in the Islamic Republic of Iran

Abstract

Objective: The economy of the Islamic Republic of Iran is an almost single-product economy, with the majority of its revenues coming from the sale of oil. Since the change in oil prices causes income shocks, it is necessary to study the effect of these fluctuations on the housing market. In this study, the effect of oil and currency price shocks on housing prices during a 16-year period between 1385 and 1400 was studied.



Methods: In this study, data related to housing prices, OPEC crude oil prices, and finally the currency exchange rate (dollars) against Rials were used as a representative of the foreign exchange market. Also, to estimate and check the data, the structural self-explanatory vector model (SVAR) model was used, which can check the shocks on different markets. Unlike the VAR method, this method brings the studied model closer to reality by applying theoretical and economic restrictions. In this study, firstly, the significance of the desired variables was checked by using the generalized Dickey-Fuller method, then, in order to estimate and find the long-term relationship, the co-accumulation test was used by the Johansen method. After specifying the limitations of the model, the model used in this study was estimated by SVAR method.



Findings: The findings of the research showed that oil price shocks had a positive effect on housing prices in the long term and a negative effect in the medium term. It was also found that exchange rate impulses and shocks have a positive and significant effect on housing prices in the medium term, and in the long term, these impulses cause negative effects on housing prices.

Conclusion: The most important result was that with the occurrence of a shock in the price of oil and currency after 9 periods and the absence of other impulses, housing prices became stable again. Also, the results showed that the most important predictor of housing prices among the studied variables is currency shocks.

Abstract

Objective: The economy of the Islamic Republic of Iran is an almost single-product economy, with the majority of its revenues coming from the sale of oil. Since the change in oil prices causes income shocks, it is necessary to study the effect of these fluctuations on the housing market. In this study, the effect of oil and currency price shocks on housing prices during a 16-year period between 1385 and 1400 was studied.



Methods: In this study, data related to housing prices, OPEC crude oil prices, and finally the currency exchange rate (dollars) against Rials were used as a representative of the foreign exchange market. Also, to estimate and check the data, the structural self-explanatory vector model (SVAR) model was used, which can check the shocks on different markets. Unlike the VAR method, this method brings the studied model closer to reality by applying theoretical and economic restrictions. In this study, firstly, the significance of the desired variables was checked by using the generalized Dickey-Fuller method, then, in order to estimate and find the long-term relationship, the co-accumulation test was used by the Johansen method. After specifying the limitations of the model, the model used in this study was estimated by SVAR method.



Findings: The findings of the research showed that oil price shocks had a positive effect on housing prices in the long term and a negative effect in the medium term. It was also found that exchange rate impulses and shocks have a positive and significant effect on housing prices in the medium term, and in the long term, these impulses cause negative effects on housing prices.

Conclusion: The most important result was that with the occurrence of a shock in the price of oil and currency after 9 periods and the absence of other impulses, housing prices became stable again. Also, the results showed that the most important predictor of housing prices among the studied variables is currency shocks.

Abstract

Objective: The economy of the Islamic Republic of Iran is an almost single-product economy, with the majority of its revenues coming from the sale of oil. Since the change in oil prices causes income shocks, it is necessary to study the effect of these fluctuations on the housing market. In this study, the effect of oil and currency price shocks on housing prices during a 16-year period between 1385 and 1400 was studied.



Methods: In this study, data related to housing prices, OPEC crude oil prices, and finally the currency exchange rate (dollars) against Rials were used as a representative of the foreign exchange market. Also, to estimate and check the data, the structural self-explanatory vector model (SVAR) model was used, which can check the shocks on different markets. Unlike the VAR method, this method brings the studied model closer to reality by applying theoretical and economic restrictions. In this study, firstly, the significance of the desired variables was checked by using the generalized Dickey-Fuller method, then, in order to estimate and find the long-term relationship, the co-accumulation test was used by the Johansen method. After specifying the limitations of the model, the model used in this study was estimated by SVAR method.



Findings: The findings of the research showed that oil price shocks had a positive effect on housing prices in the long term and a negative effect in the medium term. It was also found that exchange rate impulses and shocks have a positive and significant effect on housing prices in the medium term, and in the long term, these impulses cause negative effects on housing prices.

Conclusion: The most important result was that with the occurrence of a shock in the price of oil and currency after 9 periods and the absence of other impulses, housing prices became stable again. Also, the results showed that the most important predictor of housing prices among the studied variables is currency shocks.