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The impact of quantitative easing and carry trade on the real estate market in Hong Kong

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  • Miyakoshi, Tatsuyoshi
  • Li, Kui-Wai
  • Shimada, Junji
  • Tsukuda, Yoshihiko

Abstract

This paper examines how the quantitative easing (QE) policy conducted by Japan, EU and the US raised Hong Kong’s real estate prices through activities in carry trade and in Hong Kong’s real estate investment trust (H-REIT) market. The empirical results demonstrated two new channels of impact. The first new channel shows that Japan’s QE policy did affect the H-REIT prices in money market, which then led to a rise in office price after a lag of three months. The office prices were more persistently affected by the channel through the H-REIT than through the stock prices. Another new channel shows that the QE policy by Japan, the EU and the US since 2008 directly pushed up the office prices. These two new channels imply that the QE policy spilled over to not only the money market, but also the real estate market through the H-REIT market and carry trade. Moreover, the empirical finding is stronger in the price of the ordinary grade office than in the high-grade office, suggesting these new channels have already become common. Moreover, even though introducing control variables in the real estate economics literature, the results are robust.

Suggested Citation

  • Miyakoshi, Tatsuyoshi & Li, Kui-Wai & Shimada, Junji & Tsukuda, Yoshihiko, 2020. "The impact of quantitative easing and carry trade on the real estate market in Hong Kong," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 958-976.
    • Handle: RePEc:eee:reveco:v:69:y:2020:i:c:p:958-976
    DOI: 10.1016/j.iref.2020.05.006
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    More about this item

    Keywords

    Quantitative easing; Real estate prices; Two channels; REIT markets; Carry trade;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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