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What determines China's housing price dynamics? New evidence from a DSGE‐VAR
Author(s) -
Liu Chunping,
Ou Zhirong
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1962
Subject(s) - dynamic stochastic general equilibrium , economics , china , shock (circulatory) , monetary economics , monetary policy , macroeconomics , shadow (psychology) , econometrics , vector autoregression , psychology , psychotherapist , medicine , political science , law
We investigate what determines China's housing price dynamics using a DSGE‐VAR estimated with priors allowing for the featured operating of normal and “shadow” banks in China, with data observed between 2001 and 2014. We find that the housing demand shock, which is the essential factor for housing price “bubbles” to happen, accounts for near 90% of the housing price fluctuation. We also find that a prosperous housing market could have led to future economic growth, though quantitatively its marginal impact is small. But this also means that, for policy‐makers who wish to stabilize the housing market, the cost on output reduction would be rather limited.