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How Important are Oil and Money Shocks in Explaining Housing Market Fluctuations in an Oil-exporting Country?: Evidence from Iran

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  • Khiabani, Nasser

Abstract

This paper analyzes the effects of oil price and monetary shocks on the Iranian housing market in a Bayesian SVAR framework. The prior information for the contemporaneous identification of the SVAR model is derived from standard economic theory. To deal with uncertainty in the identification schemes, I calculate posterior model probabilities for the SVAR model identified by a different set of over-identification restrictions. In order to draw accurate inferences regarding the effectiveness of the shocks in an over-identified Bayesian SVAR, a Bayesian Monte Carlo integration method is applied. The findings indicate that oil price shocks explain a substantial portion of housing market fluctuations. Housing prices increase in response to a positive credit shock, but only with a noticeably smaller magnitude when compared with the response to a positive oil price shock.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34041.

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Date of creation: 06 Mar 2010
Date of revision: 01 Mar 2011
Handle: RePEc:pra:mprapa:34041

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Keywords: Housing market fluctuations; Oil price shocks; Credit shocks; Bayesian Structural VAR; Bayesian model averaging (BMA); Bayesian Monte Carlo integration method;

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