M Reza GHASEMI, A Rahman SETAYSH, Corresponding AUTHOR

Relationship between Liquidity and Price Bubble in Tehran's Asset Market

In this paper, according to Austrian school, the existence of bubbles in asset market of Tehran from 1998 to 2009 is attributed to the unexpected fluctuations of liquidity. To find out the process of bubble, the state space form and Kalman filter are used and bubble is brought out as unobserved variable of price series. In order to determine the long run relationship between liquidity and price bubble the VAR method proposed by Johanson and Jelisus is used. The result confirms that variation of liquidity has a significant effect on the creating of bubble in long run

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