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Impact of international capital flows on real estate market: The empirical test in China from 1998 to 2006

Author

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  • SONG Bo

    (Department of Economics, Nanjing University, Nanjing 210093, China)

  • GAO Bo

    (Department of Economics, Nanjing University, Nanjing 210093, China)

Abstract

Taking the inflation into consideration and making use of the quarter data of the actual foreign investment, housing and land prices in China from 1998 to 2006, this paper examines the relationship between housing prices and international capital flows using Error Correction Model (ECM) and Granger causality test. Results show that in the short run, the increase of housing prices attracts the inflow of foreign capitals; in the long run, foreign capitals help to boost the rise of housing prices. Therefore, at present, Chinese government must impose effective restrictions on the flow of foreign capital into the real estate market.

Suggested Citation

  • SONG Bo & GAO Bo, 2007. "Impact of international capital flows on real estate market: The empirical test in China from 1998 to 2006," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 2(4), pages 520-531, December.
    • Handle: RePEc:fec:journl:v:2:y:2007:i:4:p:520-531
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-007-0027-8
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    Cited by:

    1. Hassan Fereidouni Gholipour & Usama Al-mulali & Abdul Hakim Mohammed, 2014. "Foreign investments in real estate, economic growth and property prices: evidence from OECD countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 17(1), pages 33-45, March.

    More about this item

    Keywords

    inflation; international capital flows; real estate prices;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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