Development of a Dynamic Spatial Durbin Model with Generalized Common Effects (SDM-DPD(GCE)) to Examine the Impact of Macroeconomic Indicators on Housing Prices in Iran
Keywords:
Housing prices, Spatial spillovers, Herding behavior, Cross-sectional dependence, Dynamic spatial econometrics, Generalized common effects, Iran, Emerging marketsAbstract
Regional housing prices in emerging economies are simultaneously shaped by common macroeconomic shocks, geographic spillovers and local speculative behaviour. Jointly assessing their relative roles within a single framework is the aim of this paper. We study Iran’s 31 provinces over 2015–2024 using a Dynamic Spatial Durbin Model with Generalised Common Effects (SDM-DPD(GCE)), estimated by Quasi-Maximum Likelihood. After removing the dominant common macro factor, a spatial ripple coefficient of 0.593 emerges, consistent with cross-border price linkages, conditional on the maintained model specification, rather than shared exposure to national shocks. A lagged provincial herding proxy (CSAD) is associated with further price divergence the following year, with a total effect of 1.721 once spatial feedback is accounted for. A structural break at 2018 marks a sharp intensification of both dynamics, coinciding with Iran’s major currency shock. The paper also provides empirical evidence consistent with the view that extreme cross-sectional dependence can suppress Moran’s I in raw panels, a diagnostic pitfall relevant to any high-CD empirical setting.
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Copyright (c) 2025 Mahyar Ramezankhani (Author); Albert Boghosian
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