the dynamic effect of macroeconomic factors on fluctuations of housing price in iran (1990-2007)

the purpose of this study is to examine the dynamic effects of some macroeconomic variables: money stock, gross domestic product, consumer price index and exchange rates on determining housing price index behavior in iran using the error correction model. using seasonal data, the model is estimated by johansen-juselius cointegration approach during 1990-2007. the results reveal that all variables have a significant and positive relationship with housing price index. forecast error variance decomposition shows that a large amount of house price changes can be explained by the variable itself until the fifth period, and with the increase of lag periods, share of gross domestic product, exchange rates, money and consumer price index would increase in explaining housing price index fluctuations. furthermore, the response of housing price index to one standard deviation impulse in the aforementioned variables results in housing price index increase, and it returns to the permanent level after ten periods. the value of error correction coefficient is equal to -0.17 and is statistically significant; therefore, about 17 percent of housing price disequilibrium would be adjusted in each period. with regard to the nature of housing sector in iran, such slow adjustment seems to be quite rational.