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The business cycle implications of land financing in China

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  • Guo, Shen
  • Liu, Lezheng
  • Zhao, Yan

Abstract

In the past decade, the Chinese government was increasingly relying on revenues from land sales to finance the public spending. This paper examines the impacts of land financing on business cycle fluctuations in China in an estimated DSGE model. The simulation results indicate that the overall effect of land financing is to increase the business cycle fluctuations by 12.6%. However, the impacts of land financing on business cycle fluctuations depend on shocks hitting the economy. The policy implication of this paper is that cutting the direct linkage between the government expenditure and the land sales could mitigate the business cycle fluctuations.

Suggested Citation

  • Guo, Shen & Liu, Lezheng & Zhao, Yan, 2015. "The business cycle implications of land financing in China," Economic Modelling, Elsevier, vol. 46(C), pages 225-237.
  • Handle: RePEc:eee:ecmode:v:46:y:2015:i:c:p:225-237
    DOI: 10.1016/j.econmod.2014.12.033
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    References listed on IDEAS

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    Cited by:

    1. repec:gam:jsusta:v:8:y:2015:i:1:p:16:d:61206 is not listed on IDEAS
    2. Jing Qian & Yunfei Peng & Cheng Luo & Chao Wu & Qingyun Du, 2015. "Urban Land Expansion and Sustainable Land Use Policy in Shenzhen: A Case Study of China’s Rapid Urbanization," Sustainability, MDPI, Open Access Journal, vol. 8(1), pages 1-16, December.
    3. Wang, Ren & Hou, Jie & He, Xiaobei, 2017. "Real estate price and heterogeneous investment behavior in China," Economic Modelling, Elsevier, vol. 60(C), pages 271-280.
    4. Xuewen Li & Weiwen Zhang & Yi Peng, 2016. "Grain Output and Cultivated Land Preservation: Assessment of the Rewarded Land Conversion Quotas Trading Policy in China’s Zhejiang Province," Sustainability, MDPI, Open Access Journal, vol. 8(8), pages 1-15, August.

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