The Impact of economic uncertainty index on price growth acceleration and changes in housing transactions in Iran

Articles in Press

Document Type : Research Paper

Authors

1 Department of Economics, Al.C., Islamic Azad University, Aligudarz, Iran

2 Department of Economics, Ar.C., Islamic Azad University, Arak, Iran,

3 Department of Mathematics, Al.c., Islamic Azad University, Aligudarz, Iran

Abstract

Objective: This paper focuses on examining the complex and multifaceted impact of economic uncertainty on the acceleration of price growth and changes in the number of transactions to analyze market turning points and instabilities.

Methodology: First, an economic uncertainty index is constructed by averaging the standardized fluctuations of seven macroeconomic variables. Using this index, a panel data model with random effects is estimated for 30 provinces of the country during the period 2008 to 2023. Then, for structural analysis of the findings, a dynamic stochastic general equilibrium model based on the optimization behavior of households and banks is calibrated using Bayesian methods.

Results: According to the results, economic uncertainty has a positive and significant effect on the acceleration of housing price growth, but a non-significant effect on the acceleration of changes in the number of housing transactions. Structural analysis of the DSGE model provides a deep interpretation of these dual findings and reveals an “inflation-recession divergence”. Price momentum is resilient as speculative demand (housing as a safe haven) overwhelms the initial caution of consumer buyers. In contrast, transaction momentum experiences a severe boom-bust cycle; an initial emotional surge that quickly gives way to a deep crash caused by the affordability crisis and credit crunch, explaining the lack of significance of its average effect.

Conclusion: This divergence suggests that in the Iranian economy, housing prices are disconnected from real market fundamentals and that dual policies should be designed to simultaneously manage capital demand and support consumer demand.

Keywords

Main Subjects

Applied Theories of Economics

Articles in Press, Accepted Manuscript
Available Online from 30 September 2025

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