Bubble Migration between the Foreign Exchange Market and the Housing Market

Abstract

The main objective of the study is to investigate the bubble migration between foreign exchange and housing markets in Iran using seasonal data of 1966-1396. In this regard, bubble dating is discovered by using of Phillips et al (2015) method; then, bubble migration from the foreign exchange market to the housing market and from the housing market to the foreign exchange market is examined, using the Gomez-Gonzales et al. (2016) method. The results show that there are 7 bubble periods in the foreign exchange market; and 7 bubble periods in the Housing market. four hypotheses were defined for examine the bubble migration, according to the bubble dates (from the foreign exchange to housing market and vice versa). The results of the hypothesis testes showed that the first house bubble (2007Q2-2008Q3) led to the creation of the first bubble of the foreign exchange market (2007Q4-2008Q3). It seems that in the currency restriction conditions, the probability of creating a foreign exchange bubble and its migration to the housing market is rather high and vice versa.

Keywords

• bubble migration
• bubble dating
• foreign exchange market
• housing market