Rational Expectation House Price Bubbles in Iran

Document Type : Research Article

Authors

1 Ph.D candidate, Department of Economics, University of Sistan and Baluchestan, Zahedan, Iran.

2 Professor, Department of Economics,University of Sistan and Baluchestan, Zahedan, Iran

3 Assistant Professor, Department of Economics, University of Sistan and Baluchestan, Zahedan, Iran

Abstract

Since the housing sector has an intricate relationship with other sectors of the economy, fluctuations in the price can be costly. Also, rising prices are either rooted in the underlying conditions of the economy or simply caused by the bubble, leading to different policies. Therefore, house price bubble can be considered as an early warning system to prevent adverse economic consequences. The present paper applies the theory of rational expectation bubble in the Iranian housing market during the years 2006-2020 using the Blanchard and Watson model. The theory implies that negative returns on house prices are less likely to occur if the bubbles exist. The risk assessment is, however, estimated by linear logistic function. The existence of bubble in housing market is confirmed based on 30 provinces.

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Main Subjects

References

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Journal of Applied Economics Studies in Iran
Volume 11, Issue 44
English
March 2023
Pages 103-121

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