The role of house prices in transmission of the monetary shocks to consumption as the largest component of aggregate demand and residential investments in Iran has been studied in this paper. A structural vector autoregression (SVAR) is developed based on 1990-2009 data and counterfactual simulation approach. The results show that changes in house prices can cause about 38% of the rise in consumption and about 67% of the rise in residential investment followed by a monetary shock. Therefore، house prices can be considered as an important indicator of the assessment of the effects of monetary changes on the real sector activity.
