Analyzing of business cycle of private residential investment (Markov-switching vector auto regression model) Print

Business cycles are the characteristics of the real estate market that get less attention in economics literature. Real estate market on the one hand is relatively high affected by economic business cycle and on the other hand significantly can affect economic as it can cause big financial crisis. Such importance of house market makes analyzing of real estate market Inevitable. In this paper close attention is paid to business cycle in real estate market in Iran and private residential investment behavior using Markov-switching VAR model is analyzed. Results achieved from Iran economy shows probability of staying in boom period is more than transition from it (95% vs. 5%) and probability of transition of stagnation period is more than staying in that (73% vs. 27%). According to these results expected duration of boom period is five time longer than expected duration of stagnation period.