Tehran’s house price ripple effects in Iran: application of bootstrap asymmetric panel granger non-causality in the frequency domain

The purpose of this study is to examine the ripple effects from Tehran, the capital city of Iran, to other major Iranian cities by applying a new methodological approach: a bootstrap asymmetric panel Granger non-causality in the frequency domain and a univariate stationary test with an unknown number and shape of break dates. To the best of our knowledge, this study is the first in the literature to combine two existing methods for testing ripple effect (Granger non-causality and price convergence hypothesis). Using semi-annual data from 1993 to 2017, our findings suggest that Tehran’s house price ripples out to the house prices of other cities, but it does not result in house price convergence toward Tehran. We also find that some cities are affected by only positive shocks of Tehran’s house price while some cities are affected by only negative shocks of Tehran’s house price; other cities are affected by both positive and negative shocks of Tehran’s house price.