An Evaluation of Risk Transmission over Foreign Exchange, Real Estate and Stock Markets in Iran's Economy (An Application of Parametric and Non-Parametric Value at Risk Approach)

The international spillover remarkably affects the asset markets risks mainly through macroeconomic variables in Iran`s economy. To assess it, we evaluate VaR of assets market during 1990-2015.The results underscore the VaR which are statistically computed by the nonparametric approaches are considered more efficient than parametric approaches due to lower standard deviation and coefficient of variation as well as a better reflection of cyclical shocks.The Causality test indicates the foreign exchange VaR causes the stock price VaR while the stock price VaR simultaneously causes the mortgage price VaR.The impact of macroeconomic variables on the assets market VaRs is also estimated by the causality test as the output growth adversely inspires the VaRs of mortgage price and foreign exchange rate. Meanwhile, money base is constantly stimulated by the assets market VaRs in the short and medium term owing to money base. As a consequent, reduction in foreign exchange market risk lead to a reduction in other assets market risk and eventually overall economy. Therefore, it is desirable to design complementary mechanisms to fulfill the task.