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The Interaction between Housing Investment and Economic Growth in China

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Author Info
Liu Hongyu () (Institute of Real Estate Studies, Tsinghua University, Beijing 100084, China)
Yun W. Park () (California State University, Fullerton)
Zheng Siqi () (Institute of Real Estate Studies, Tsinghua University, Beijing 100084, China)
Abstract

The importance of housing investment in the national economy and its rapid growth have become distinct characteristics of the Chinese economy in recent years. However, at the same time, there is a concern that the economic growth heavily dependent on housing investment may compromise the stability and the health of the national economy. Using Granger causality analysis, this paper examines the interaction between housing investment and economic growth as well as that between non-housing investment and economic growth. We find evidence that housing investment has a stronger short run effect on economic growth than non-housing investment. We also find that housing investment has a long run effect on economic growth while economic growth has a log run effect on both housing and non-housing investment. Our findings suggest that housing investment is an important factor for the short-term fluctuations of economic growth, with its growth stimulating the economic growth and its slumps leading to downside fluctuations.

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Publisher Info
Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 5 (2002)
Issue (Month): 1 ()
Pages: 40-60
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Handle: RePEc:ire:issued:v:05:n:01:2002:p:40_60

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Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Related research
Keywords: Economic growth; housing investment; non-housing investment; Granger causality; cointegration; error correction model;

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Find related papers by JEL classification:
L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Liu Hongyu, 1998. "Government Intervention and Performance of the Housing Sector in Urban China," International Real Estate Review, Asian Real Estate Society, vol. 1(1), pages 127-149. [Downloadable!]
  2. Neely, Christopher J. & Weller, Paul, 2000. "Predictability in International Asset Returns: A Reexamination," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(04), pages 601-620, December. [Downloadable!]
    Other versions:
  3. Toda, Hiro Y & Phillips, Peter C B, 1993. "Vector Autoregressions and Causality," Econometrica, Econometric Society, vol. 61(6), pages 1367-93, November. [Downloadable!] (restricted)
    Other versions:
  4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March. [Downloadable!] (restricted)
  5. Fang, Cheng & Zhang, Xiaobo & Fan, Shenggen, 2002. "Emergence of urban poverty and inequality in China: evidence from household survey," China Economic Review, Elsevier, vol. 13(4), pages 430-443, December. [Downloadable!] (restricted)
  6. Zhang, Wei-Bin, 1994. "Capital, population and urban patterns," Regional Science and Urban Economics, Elsevier, vol. 24(2), pages 273-286, April. [Downloadable!] (restricted)
  7. Brito, Paulo M. B. & Pereira, Alfredo M., 2002. "Housing and Endogenous Long-Term Growth," Journal of Urban Economics, Elsevier, vol. 51(2), pages 246-271, March. [Downloadable!] (restricted)
  8. Braid, Ralph M., 2001. "Spatial Growth and Redevelopment with Perfect Foresight and Durable Housing," Journal of Urban Economics, Elsevier, vol. 49(3), pages 425-452, May. [Downloadable!] (restricted)
  9. Hiro Y. Toda & Peter C.B. Phillips, 1991. "Vector Autoregression and Causality: A Theoretical Overview and Simulation Study," Cowles Foundation Discussion Papers 1001, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  10. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November. [Downloadable!] (restricted)
  11. Madsen, Jakob B., 2002. "The causality between investment and economic growth," Economics Letters, Elsevier, vol. 74(2), pages 157-163, January. [Downloadable!] (restricted)
  12. Richard K. Green, 1996. "Follow the Leader: How Changes In Residential and Non-Residential Investment Predict Changes in GDP," Wisconsin-Madison CULER working papers 96-05, University of Wisconsin Center for Urban Land Economic Research. [Downloadable!]
    Other versions:
  13. Charles Ka Yui Leung, 2003. "Economic Growth And Increasing House Prices," Pacific Economic Review, Blackwell Publishing, vol. 8(2), pages 183-190, 06. [Downloadable!] (restricted)
  14. N. Edward Coulson & Myeong-Soo Kim, 2000. "Residential Investment, Non-residential Investment and GDP," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(2), pages 233-247. [Downloadable!] (restricted)
  15. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ray Brooks & Steven Barnett, 2006. "What's Driving Investment in China?," IMF Working Papers 06/265, International Monetary Fund. [Downloadable!]
  2. Wensheng Peng & Dickson C. Tam & Matthew S. Yiu, 2007. "The Property Market and the Macroeconomy of the Mainland: A Cross Region Study," Working Papers 052007, Hong Kong Institute for Monetary Research. [Downloadable!]
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