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Analyzing the Effect of Housing Market Shocks
on the Credit Tightening in Iran
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Ezatollah Abbasian *   , Ebrahim Nasiroleslami , Kolsoom Roshani |
| bu ali Sina University , Abbasian@basu.ac.ir |
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Abstract: (3837 Views) |
The aim of this paper is to study the effects of recessions and booms of the housing market on credit tightening in Iranian banking system. So, we use dynamic stochastic general equilibrium (DSGE) model based on New Keynesians approach. By setting the parameters and the initial values with using the calibration method for during 1369-1394, the validity of the proposed framework to simulate the model for Iran’s economy are confirmed by the results. Furthermore, the results of the survey show that the negative housing demand shock with a price reduction in the housing market would cause a decrease in the quality of bank’s balance sheets, and banks credit supply, as a result of this process, decrease and credit tightening will occur. A positive housing demand shock, not only lead to increases the credibility of banks but also induce decreases in the consumption, production, investment and employment in the non-housing sector, so eventually cause the GDP to decrease. With consideration of housing price increase, the general level of prices would increase too. As a result, the prosperity of housing market demand not only has not any positive effect on the economy but also is a factor of the recession in the economy.
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| Keywords: Asset prices, Housing, Credit constraints, credit crunch, Dynamic Stochastic General Equilibrium |
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Full-Text [PDF 1213 kb]
(921 Downloads)
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Type of Study: Research |
Subject:
Special
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