The Influence of Housing Investment as an Asset Price Channel on Inflation

Ahmad Arabian Mahdi (), Ali Akbar Khosravinejad (), Mehdi Pedram (), Rafik Nazarian () and Teymoor Mohammadi ()
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Ahmad Arabian Mahdi : Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University
Ali Akbar Khosravinejad : Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University
Mehdi Pedram : Department of Economics, Alzahra University
Rafik Nazarian : Faculty of Economics and Accounting, Central Tehran Branch, Islamic Azad University
Teymoor Mohammadi : Faculty of economics, Allameh Tabataba’i University

Journal of Money and Economy, 2017, vol. 12, issue 2, 123-143

Abstract: The housing market plays a significant role in the economies of countries, and as an asset price channel, is considered as one of the main channels for monetary transmission mechanism. Considering the structure of the country's economy and the characteristics of housing as a capital commodity, the assessment of the impact of housing investment on inflation is important. This research evaluates the impact of housing investment, as an asset price channel, on inflation in Iran's economy by self-regression model with the possibility of changing the regime of Markov (MS-VAR) and using seasonal data for the period of 1369-1395. In general, it is concluded that the investment channel, as an asset price channel, in the housing sector contributes to inflation in each period of recession and boom, and increases inflation. Also, the channel does not affect the exchange rate during the recession, but it leads to a devaluation of the national currency during the boom.

Keywords: Monetary Transmission Mechanism; Business Cycles; Markov Switching VAR Model (search for similar items in EconPapers)
JEL-codes: C34 L85 R20 (search for similar items in EconPapers)
Date: 2017
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