Contagion of currency shocks to the housing market; an application of APARCH , EGARCH and DCC models

Maryam alsadat Mirhadi ¹ ( PhD Student, Department of Economics, Fi. C., Islamic Azad University, Firuzkuh, Iran, [e-mail] )
Mahmood Mahmoodzadeh ² ( ** Associate Professor, Department of Economics, Fi. C., Islamic Azad University, Firuzkuh, Iran (Corresponding Author), [e-mail] )
, Saleh  Qavidel Dostkoi ³ ( Associate Professor, Department of Economics, Fi. C., Islamic Azad University, Firuzkuh, Iran, [e-mail] )
Mehdi Fathabadi ⁴ ( Assistant Professor, Department of Economics, Fi. C., Islamic Azad University, Firuzkuh, Iran, [e-mail] )

Submited date : 2025-05-07 Accepted date : 2025-08-27

Keywords: Key words: currency fluctuation, housing price, conditional dynamic correlation, Iran,

Abstract :

The aim of this paper is to assess the contagion of exchange rate shocks on housing prices in Iran. For this purpose, first the behavior of exchange rate fluctuations and housing prices was modeled using APARCH and EGARCH models, and then the stochastic conditional dynamic correlation between the two markets was evaluated using the DCC model in the period 1372-1400. Conditional heteroscedastic models for time series play an important role in financial forecasts, risk management, and individual decision-making based on asset prices. The findings show that the fluctuations of the exchange rate and housing markets are asymmetric and that negative shocks affect the fluctuations of these two markets more than positive shocks and increase the amplitude of housing price fluctuations. In addition, the results show that there is a strong correlation between the fluctuations of the two markets and it is stable, and this correlation has always been positive, sometimes with greater intensity and sharpness. It was found that during the period of currency instability, this alignment has been strengthened.The fluctuations of the past period of exchange rate affect the current fluctuations, even more than the current exchange rate fluctuations. Therefore, exchange rate fluctuations are strongly transmitted to the housing market. In this regard, the optimal management of exchange rate fluctuations along with the implementation of capital gains tax policy in the housing market will help stabilize housing prices

References:

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