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Oil inflows and housing market fluctuations in an oil-exporting country: Evidence from Iran

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  • Khiabani, Nasser

Abstract

In this study, I develop a structural macroeconomic model for Iran, an oil exporting country, highlighting the transmission channels of oil prices to the housing market. The model combines three blocks of macroeconomic interest consisting of money, goods and foreign exchange markets with the housing market. I identified and estimated the model using a Bayesian structural vector autoregressive framework. I also use posterior model probabilities to deal with uncertainty in the identification scheme and Bayesian Monte Carlo integration methods to obtain the correct posterior distribution for the structural parameters and to generate accurate confidence intervals for the impulse responses. The findings indicate that oil price shocks have a positive and persistent effect on housing activities. In contrast, money expansion has limited effect on housing market variables. Quantitatively, in the medium and long run, positive oil shocks explain about 28% of the variation in housing stocks and 21% of the variation in real housing prices. By contrast, money shocks explain 11% and 5% of the variation in housing stocks and housing prices, respectively

Suggested Citation

  • Khiabani, Nasser, 2015. "Oil inflows and housing market fluctuations in an oil-exporting country: Evidence from Iran," Journal of Housing Economics, Elsevier, vol. 30(C), pages 59-76.
  • Handle: RePEc:eee:jhouse:v:30:y:2015:i:c:p:59-76 DOI: 10.1016/j.jhe.2015.10.002
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    Cited by:

    1. repec:eee:jebusi:v:93:y:2017:i:c:p:15-28 is not listed on IDEAS
    2. Killins, Robert N. & Egly, Peter V. & Escobari, Diego, 2017. "The impact of oil shocks on the housing market: Evidence from Canada and U.S," Journal of Economics and Business, Elsevier, vol. 93(C), pages 15-28.

    More about this item

    Keywords

    Housing market fluctuations; Oil price shocks; Money shocks; Bayesian Structural VAR; Posterior model probability (PMP); Bayesian Monte Carlo integration method;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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