Asymmetric Relationship Between Housing Prices and Money Demand in Iran (Quantile-on-Quantile Approach)

Roozbeh Balounejad Nouri, Ali Yonesi and Amir Ali Farhang
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Roozbeh Balounejad Nouri: Associate Professor, Department of Economics, Economic Affairs Research Institute, Tehran, Iran
Ali Yonesi: Assistant Professor, Department of Economics, Payame Noor University, Tehran, Iran
Amir Ali Farhang: Associate Professor, Department of Economics, Payame Noor University, Tehran, Iran

Quarterly Journal of Applied Theories of Economics, 2025, vol. 12, issue 2, 75-98

Abstract: This study investigates the relationship between housing prices and the demand for money. To this end, seasonal data from the period 2013:Q1 to 2022:Q4 were analyzed using the Quantile-on-Quantile (QQ) estimation method, which combines non-parametric estimation techniques with quantile regression. The results reveal that the effect of housing prices on money demand is both symmetrical and non-linear. Specifically, as housing prices increase, the demand for money decreases—most notably in the middle quantiles. This finding supports the negative substitution hypothesis, suggesting that housing acts as a substitute asset within the portfolio. Furthermore, the study finds that economic growth positively affects money demand in the middle quantiles, while exerting a negative influence in the lower and upper quantiles. Regarding inflation and the exchange rate, the results indicate that inflation has a symmetrical impact on money demand, whereas the exchange rate effect is asymmetrical. In other words, higher inflation leads to increased money demand, but the influence of the exchange rate varies across quantiles—differing significantly between the upper and lower ends of the exchange rate distribution.

Keywords: Money Demand; Housing Market; Quantile-on-Quantile Regression (search for similar items in EconPapers)
JEL-codes: E41 E52 G15 (search for similar items in EconPapers)
Date: 2025
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