:: Volume 11, Issue 4 (Fall 2016) ::
J. Mon. Ec. 2016, 11(4): 401-417 Back to browse issues page
House Price Rigidity and the Asymmetric Response of Housing Prices to Monetary Policy in Iran
Roohollah Zare
Department of Economics, Beyza Branch, Islamic Azad University
Abstract:   (1253 Views)
This paper examines downward price rigidity in Iranian house market and discusses whether this characteristic would result in an asymmetric relationship between house price and monetary policy. To test the downward house price rigidity the threshold GARCH model is employed. The asymmetric adjustment to monetary policy is examined using the asymmetric cointegration and error correction models. The results indicate the presence of the downward house price rigidity in Iranian house market. Moreover, house price are asymmetrically adjusted to monetary policy such that it is increased to reflect a loose monetary policy whereas displayed a large amount of persistency following a tight monetary policy. The results imply that house price tend to overreact in upturns and underreact in downturns reaffirming the downward house price rigidity in Iran. Hence, the government should consider the asymmetric house price adjustment when implementing relevant policies for the house market to avoid the creation of a bubble or the collapse of the house market.
Keywords: Downward House Price Rigidity, Monetary Policy, Threshold GARCH, Asymmetric Cointegration, Error Correction Model
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Type of Study: Original Research - Theoric | Subject: Monetary Economics
Received: 23 Jul 2018 | Accepted: 4 Sep 2018 | Published: 9 Dec 2018

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Volume 11, Issue 4 (Fall 2016) Back to browse issues page