The Impact of Foreign Trade on Residential Investment in Iran Economy

Countries typically use government fiscal and central bank monetary policy tools to achieve economic growth and development goals. On the other hand, due to the growing importance of international trade and interdependence of economies and also due to the importance of housing in the country's economy, this study will pay to examin the effects of monetary and fiscal policy variables and the impact of foreign trade on housing investment in Iran's economy in open economy and closed economy. To examine these effects, the vector error correction model (VECM) and the period of 1397: 1368-1: 1 have been used. The Generalized Reaction Functions (GIRFs) show that the facilities granted in the housing and consumption sectors and liquidity have a greater impact on housing investment than government investment expenditures. Government investment expenditures in housing and construction as a fiscal policy variable have a small but positive effect on housing investment, so that the inclusion of foreign trade in the model of the effect of government investment in the housing sector has decreased. The findings of this study emphasize the importance of monetary policy on housing investment compared to fiscal policy. The generalized reaction functions and the analysis of variance of the prediction error also confirmed the obtained results.