Analysis of the Effect of Currency Shock, Economic Sanctions and Oil Prices on the Housing Market (Using Structural Vector-Autoregressive SVAR)

This paper analyzes the effect of currency shocks, economic sanctions, and oil prices on the housing market in Iranian economy using the SVAR Model (Structural Vector Autoregressive) for 1984-2019. According to the results of SVAR model, an impulse from the oil price would increase housing prices by 78%, while a currency exchange rate and sanctions impulse would increase housing prices by %174 and 83% respectively. It can be argued that the rise in oil revenues is largely unmanaged, and long-term investments have been spent on short-term expenditures, which has resulted to inflation, increased liquidity and a devaluation of the national currency. Thus, the shocks of rising oil revenues have largely led to increased liquidity and thus to higher prices due to the lack of sound financial planning by governments. Planning and optimizing economic sectors to control the government deficit and thus borrowing from the central bank, which is one of the most important drivers of liquidity growth and rising prices it is very important during sanctions. Overall, the government financial irregularities, insufficient attention to manufacturing infrastructure has led to a rapid increase in liquidity growth and price levels in society, which in such circumstances exacerbates the effects of currency shocks, economic sanctions and oil price fluctuations on the housing market