The Role of Foreign Trade in Influencing GDP Components on Residential Investment

During the past two decades, Iran’s economy has been observed most cyclical changes in the housing sector. With respect to the growing importance of international trade and interdependence of countries, this study investigates the role of GDP components in residential and non-residential investment in the presence of foreign trade. For residential and non-residential investment fluctuation analysis, this paper has used in vector error correction model and quarterly data from 1370-1 to 1386-4. Results of generalized impulse response functions (GIRFs) illustrate that government spending has had a dominant influence on affecting both types of investment. Effect of Residential investment in non-residential investment is relatively strong, while non-residential investment has had a low effect on residential investment. The Presence of net exports in model has caused many different results as government spending and consumption effects diminished, but it has influenced investments effect on each other. The Findings obtained from orthogonal variance decompositions (VDCs) also has confirmed the results of generalized impulse response functions.