The Effect of Housing Assets on Private Consumption Expenditures in Iran

Abstract

The purpose of this study is to measure and analyze the effect of housing assets on private sector consumption using time series data in Iran for 1985-2020. This study analyzes the relationship in the form of an autoregressive distributed lag (ARDL) econometric model using Eviews software. The short-term and long-term marginal propensity to consume of permanent income, housing and financial assets is also employed. The short-term and long-term marginal propensity to consume of permanent income are 0.55 and 0.69 and the short-term and long-term marginal propensity to consume of permanent income of housing assets are 0.56 and 0.70. The error correction model shows the adjustment of short-term disequilibrium with a coefficient of 0.48, which is a reasonable relative adjustment rate. Another result of this study is the positive significant effect of financial assets on private consumption in Iran. Various studies in this field around the world show the importance of this issue, such as Dong et al. (2021), Mian et al. (2016), Burrowss (2018), Cho (2016), Lacoviello (2015, Beatrice & Kengne (2015), and other researchers who have studied the impact of housing prices on household expenditure in China, Chicago, South Korea, the United States, the United Kingdom, etc.