Examination of the effect of asset price bubbles on the economic welfare indicators in terms of the monetary policies

Jamshidi, Farhad; Sadrara, Mehrdad; Mahfouzi, Gholamreza

doi:10.22075/ijnaa.2024.33955.5064

Examination of the effect of asset price bubbles on the economic welfare indicators in terms of the monetary policies

Document Type : Research Paper

Authors

Farhad Jamshidi ¹

Mehrdad Sadrara ²

Gholamreza Mahfouzi ²

¹ Department of Financial Engineering, Faculty of Management and Accounting, Rasht Branch, Islamic Azad University, Rasht, Iran.

² Department of Economics and Accounting, Faculty of Literature and Human Sciences, University of Guilan, Guilan, Iran

10.22075/ijnaa.2024.33955.5064

Abstract

This research aims to find the most effective components of the asset price bubble, economic welfare and monetary policies in Iran to investigate the effect of the asset price bubble on the economic welfare indicators in terms of the monetary policies and investigate its effect on the components of the economic welfare by specifying the characteristics of asset price fluctuations in different financial markets such as the currency market, stock market, gold market, housing market through the monetary indicators. The subject of price bubbles was stated historically for the first time in the early 17th century and scientifically for the first time in the US stock market crisis from October 1929 to June 1932. For the first time, Samuelson [18] showed that the bubbles complete the existing markets, and as a result, they can enhance welfare. Still, since the structure and components of the economy in Iran are different from many countries, the use of these indicators and tools will not be effective without paying attention to these differences and taking into account these special features. For this purpose, in the present research, the survey finds the effective components and finally, the formulation of hypotheses is done. Identifying the factors affecting the creation of a bubble in the asset prices and ultimately expanding it to the real sector of the economy of Iran is the fundamental goal of this research. The results of the study showed that income distribution and the poverty line are the most effective welfare indicators in the country. Furthermore, inflationary expectations are the most important indicators for measuring the asset bubble and government policy packages and liquidity are also the most prominent indicators of our country's monetary policy. Of course, among the welfare indicators, the intellectual property and environment, as well as among the asset bubble indicators, news and information, had the least weight and importance, and the exchange rate fluctuations index was also the least important monetary policy indicator.

Keywords

Asset price bubbles

Economic welfare

Monetary policies

economy of Iran

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