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The Property Market and the Macroeconomy of the Mainland: A Cross Region Study

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  • Wensheng Peng

    (Hong Kong Monetary Authority)

  • Dickson C. Tam

    (Hong Kong Monetary Authority)

  • Matthew S. Yiu

    (Hong Kong Institute for Monetary Research)

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    Abstract

    This paper studies the nexus between the property market and the macroeconomy of Mainland China in 1998-2004, using panel data models covering 31 provinces and major cities. The estimates suggest three main conclusions. First, there seemed to be a two-way linkage between property price and GDP growth. In particular, property price increase had a significant positive impact on investment, but no evidence of a wealth effect on consumption is obtained. Second, bank credit expansion did not seem to play an 'accelerating' role in property price inflation, although the latter is found to have contributed to bank credit increase in recent years. Third, property price growth may have deviated from fundamentals in coastal areas, as evidenced by a negative relationship between housing and rental prices.

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    Bibliographic Info

    Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 052007.

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    Length: 29 pages
    Date of creation: Mar 2007
    Date of revision:
    Handle: RePEc:hkm:wpaper:052007

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    References

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    1. Charles Ka Yui Leung, 2004. "Macroeconomics and Housing: A Review of the Literature," Discussion Papers 00004, Chinese University of Hong Kong, Department of Economics.
    2. Youqin Huang, 2004. "Housing markets, government behaviors, and housing choice: a case study of three cities in China," Environment and Planning A, Pion Ltd, London, vol. 36(1), pages 45-68, January.
    3. G. Donald Jud & Dan T. Winkler, 2002. "The Dynamics of Metropolitan Housing Prices," Journal of Real Estate Research, American Real Estate Society, vol. 23(1/2), pages 29-46.
    4. Min Hwang & John M. Quigley, 2004. "Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values," The Journal of Real Estate Finance and Economics, Springer, vol. 28(2_3), pages 161-178, 03.
    5. Liu Hongyu & Yun W. Park & Zheng Siqi, 2002. "The Interaction between Housing Investment and Economic Growth in China," International Real Estate Review, Asian Real Estate Society, vol. 5(1), pages 40-60.
    6. Kimhi, Ayal & Rekah, Hila, 2005. "The Simultaneous Evolution Of Farm Size And Specialization: Dynamic Panel Data Evidence From Israeli Farm Communities," Discussion Papers 7170, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    7. International Monetary Fund, 1999. "Neglected Heterogeneity and Dynamics in Cross-Country Savings Regressions," IMF Working Papers 99/128, International Monetary Fund.
    8. Charles Ka Yui Leung, 2003. "Economic Growth And Increasing House Prices," Pacific Economic Review, Wiley Blackwell, vol. 8(2), pages 183-190, 06.
    9. Charles Goodhart & Boris Hofmann, 2003. "Deflation, Credit and Asset Prices," Working Papers 132003, Hong Kong Institute for Monetary Research.
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