Advanced Search
MyIDEAS: Login to save this paper or follow this series

What drives urban consumption in mainland china? The role of property price dynamics

Contents:

Author Info

  • Chen, Yu-Fu
  • Funke, Michael
  • Mehrotra, Aaron

Abstract

This paper adds to the literature on wealth effects on consumption by disentangling house price effects on consumption for mainland China. In a stochastic modelling framework, the riskiness, rate of increase and persistence of house price movements have different implications for the consumption/housing ratio. We exploit the geographical variation in property prices by using a quarterly city-level panel dataset for the period 1998Q1 – 2009Q4 and rely on a panel error correction model. Overall, the results suggest a significant long run impact of property prices on consumption. They also broadly confirm the predictions from the theoretical model.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://repo.sire.ac.uk/handle/10943/283
Download Restriction: no

Bibliographic Info

Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2011-50.

as in new window
Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:edn:sirdps:283

Contact details of provider:
Postal: 31 Buccleuch Place, EH8 9JT, Edinburgh
Phone: +44(0)1316508361
Fax: +44(0)1316504514
Email:
Web page: http://www.sire.ac.uk
More information through EDIRC

Related research

Keywords: Consumption; China; house prices; panel data;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Slacalek, Jiri, 2009. "What Drives Personal Consumption? The Role of Housing and Financial Wealth," Working Paper Series 1117, European Central Bank.
  2. Christopher D. Carroll & Misuzu Otsuka & Jiri Slacalek, 2011. "How Large Are Housing and Financial Wealth Effects? A New Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(1), pages 55-79, 02.
  3. Jie Gan, 2010. "Housing Wealth and Consumption Growth: Evidence from a Large Panel of Households," Review of Financial Studies, Society for Financial Studies, vol. 23(6), pages 2229-2267, June.
  4. Monika Piazzesi & Martin Schneider & Selale Tuzel, 2006. "Housing, Consumption, and Asset Pricing," NBER Working Papers 12036, National Bureau of Economic Research, Inc.
  5. Skinner, Jonathan, 1989. "Housing wealth and aggregate saving," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 305-324, May.
  6. Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," NBER Working Papers 14546, National Bureau of Economic Research, Inc.
  7. Martin Lettau & Sydney C. Ludvigson, 2004. "Understanding Trend and Cycle in Asset Values: Reevaluating the Wealth Effect on Consumption," American Economic Review, American Economic Association, vol. 94(1), pages 276-299, March.
  8. Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2012. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt6px1d1sc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  9. Bostic, Raphael & Gabriel, Stuart & Painter, Gary, 2009. "Housing wealth, financial wealth, and consumption: New evidence from micro data," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 79-89, January.
  10. John D. Benjamin & Peter Chinloy & G. Donald Jud, 2004. "Real Estate Versus Financial Wealth in Consumption," The Journal of Real Estate Finance and Economics, Springer, vol. 29(3), pages 341-354, November.
  11. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
  12. Hiebert, Paul & Roma, Moreno, 2010. "Relative house price dynamics across euro area and US cities: convergence or divergence?," Working Paper Series 1206, European Central Bank.
  13. Andreas Lehnert, 2004. "Housing, consumption, and credit constraints," Finance and Economics Discussion Series 2004-63, Board of Governors of the Federal Reserve System (U.S.).
  14. Yu-Fu Chen & Michael Funke & Aaron Mehrotra, 2011. "What Drives Urban Consumption In Mainland China? The Role Of Property Price Dynamics," Dundee Discussion Papers in Economics 255, Economic Studies, University of Dundee.
  15. International Monetary Fund, 2010. "Are House Prices Rising too Fast in China?," IMF Working Papers 10/274, International Monetary Fund.
  16. Koivu, Tuuli, 2010. "Monetary policy, asset prices and consumption in China," BOFIT Discussion Papers 18/2010, Bank of Finland, Institute for Economies in Transition.
  17. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  18. Joanne Cutler, 2004. "The Relationship between Consumption, Income and Wealth in Hong Kong," Macroeconomics 0403013, EconWPA.
  19. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  20. LokSang Ho & Gary Wong, 2008. "Nexus Between Housing And The Macro Economy: The Hong Kong Case," Pacific Economic Review, Wiley Blackwell, vol. 13(2), pages 223-239, 05.
  21. Joanne Cutler, 2004. "The Relationship between Consumption, Income and Wealth in Hong Kong," Working Papers 012004, Hong Kong Institute for Monetary Research.
  22. Wu, Jing & Gyourko, Joseph & Deng, Yongheng, 2012. "Evaluating conditions in major Chinese housing markets," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 531-543.
  23. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  24. Marjorie Flavin & Shinobu Nakagawa, 2008. "A Model of Housing in the Presence of Adjustment Costs: A Structural Interpretation of Habit Persistence," American Economic Review, American Economic Association, vol. 98(1), pages 474-95, March.
  25. Koivu, Tuuli, 2010. "Monetary policy, asset prices and consumption in China," Working Paper Series 1240, European Central Bank.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Yu-Fu Chen & Michael Funke & Aaron Mehrotra, 2011. "What Drives Urban Consumption In Mainland China? The Role Of Property Price Dynamics," Dundee Discussion Papers in Economics 255, Economic Studies, University of Dundee.
  2. Xi Chen & Michael Funke, 2013. "Real-Time Warning Signs of Emerging and Collapsing Chinese House Price Bubbles," National Institute Economic Review, National Institute of Economic and Social Research, vol. 223(1), pages R39-R48, February.
  3. Bussière, Matthieu & Kalantzis, Yannick & Lafarguette, Romain & Sicular, Terry, 2013. "Understanding household savings in China: the role of the housing market and borrowing constraints," MPRA Paper 44611, University Library of Munich, Germany.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:edn:sirdps:283. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gina Reddie).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.