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(A)symmetric interaction between house prices, stock market and exchange rates using linear and nonlinear approach: the case of Iran

Davoud Mahmoudinia (Faculty of Economics, Vali-e-Asr University of Rafsanjan, Rafsanjan, Iran)
Seyed Mohammad Mostolizadeh (Faculty of Economics, Semnan University, Semnan, Iran)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 20 April 2022

Issue publication date: 14 August 2023

282

Abstract

Purpose

The purpose of this study was to investigate the dynamic interactive link between housing prices, stock market price and effective exchange rate in the Iranian economy for a monthly period from April, 2004, to March, 2019. In addition, for a more accurate analysis, three control and determinates variables including real interest rate, real GDP and FDI have been added to the base model.

Design/methodology/approach

For this purpose, we will consider this issue by developing the study of Lean & Smyth (2014), Ali & Zaman (2017) and Coskun et al (2017) in the framework of ADRL and NARDL models. Also, this study analyzed the asymmetric/non-linear impact of stock market indexes and effective exchange rate on Iran’s housing inflation. Asymmetries imply to both positive and negative changes in the variables.

Findings

The results obtained from the ADRL and NARDL models suggest that the existence of cointegration relationship between housing market price and its determinants. From linear model, we found that the exchange rate and stock market price have a positive effect on the real estate inflation in the short run; this relationship is also confirmed in the long run. Other empirical results indicate that the GDP stimulates housing price in both long and short run cases, while FDI and real interest rate have an opposite effect. In addition, the results provided by the asymmetric model lead to the rejection of the null hypothesis of no co-integration between the variables. In addition, we found that the effect of stock price in the short and long term are asymmetric and there also is an asymmetric long-run effect of real exchange rate on the real estate price.

Originality/value

Finally, to analyze the sensitivity, we entered two explanatory variables of inflation and money supply to the baseline equation. The finding represented that in both linear and nonlinear framework, a positive correlation between these two variables with housing prices have been proved.

Keywords

Acknowledgements

The authors would like to thank the reviewers and the editors (Prof. Richard Reed) of International Journal of Housing Markets and Analysis for their valuable suggestions. Nevertheless, any shortcomings that remain in this research paper are solely our responsibility.

Citation

Mahmoudinia, D. and Mostolizadeh, S.M. (2023), "(A)symmetric interaction between house prices, stock market and exchange rates using linear and nonlinear approach: the case of Iran", International Journal of Housing Markets and Analysis, Vol. 16 No. 4, pp. 648-671. https://doi.org/10.1108/IJHMA-01-2022-0008

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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