The Effect of Asset Price Bubbles on Economic Welfare Indicators Considering Monetary Policies
Keywords:
Asset price bubbles, economic well-being, monetary policyAbstract
The purpose of this study is to examine the relationship between the components of asset price bubbles and economic welfare indicators while considering the mediating role of monetary policies in Iran’s economy. This research employed a mixed-method design with a sequential exploratory strategy. In the qualitative phase, semi-structured interviews were conducted with academic and economic experts to identify the most influential factors in asset bubbles, monetary policy, and welfare. Data were analyzed through open, axial, and selective coding to develop the conceptual model and hypotheses. In the quantitative phase, a structured questionnaire was distributed among individual and institutional investors in selected markets. The collected data were analyzed using SPSS and LISREL software via structural equation modeling to test the relationships among variables. Results confirmed that asset price bubbles have a significant negative effect on economic welfare indicators (β=-0.62, t=-12.28). Asset bubbles also negatively affect monetary policies (β=-0.42, t=-7.17), while monetary policies positively influence welfare indicators (β=0.50, t=9.11). The Sobel test supported the mediating role of monetary policy between asset price bubbles and welfare. “Income distribution” and “poverty line” were the strongest welfare determinants, while “inflation expectations” and “liquidity” were key indicators of asset bubbles and monetary policy. The structural model showed good fit indices (CFI=0.97, RMSEA=0.062, χ²/df=2.77). Findings suggest that monetary policies significantly moderate the adverse effects of asset price bubbles on economic welfare. Implementing prudent monetary and liquidity management strategies can stabilize the financial system and enhance overall welfare.
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Copyright (c) 2025 Farhad Jamshidi (Author); Mehrdad Sadrara (Corresponding author); Gholamreza Mahfoozi (Author)
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