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The Interaction between Housing Investment and Economic Growth in China

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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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  • Liu Hongyu & Yun W. Park & Zheng Siqi, 2002. "The Interaction between Housing Investment and Economic Growth in China," International Real Estate Review, Global Social Science Institute, vol. 5(1), pages 40-60.
    • Handle: RePEc:ire:issued:v:05:n:01:2002:p:40_60
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    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.
    3. Michael, Bryane & Zhao, Simon, 2016. "Bubble Economics How Big a Shock to China’s Real Estate Sector Will Throw the Country into Recession, and Why Does It Matter?," EconStor Preprints 141314, ZBW - Leibniz Information Centre for Economics.
    4. Jing Li & Ying Xu, 2016. "Evaluating restrictive measures containing housing prices in China: A data envelopment analysis approach," Urban Studies, Urban Studies Journal Limited, vol. 53(12), pages 2654-2669, September.
    5. Zhang, Yanbing & Hua, Xiuping & Zhao, Liang, 2011. "Monetary policy and housing prices : a case study of Chinese experience in 1999-2010," BOFIT Discussion Papers 17/2011, Bank of Finland, Institute for Economies in Transition.
    6. Dreger, Christian & Zhang, Yanqun, 2010. "Is there a bubble in the Chinese housing market?," Discussion Papers 290, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    7. Chunping Liu & Zhirong Ou, 2021. "What determines China's housing price dynamics? New evidence from a DSGE‐VAR," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 3269-3305, July.
    8. Zhang, Yanbing & Hua, Xiuping & Zhao, Liang, 2011. "Monetary policy and housing prices: a case study of Chinese experience in 1999-2010," BOFIT Discussion Papers 17/2011, Bank of Finland Institute for Emerging Economies (BOFIT).
    9. Hakkı Kutay Bolkol, 2015. "Causal Relationship between Construction Production and GDP in Turkey," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 4(3), pages 42-53, July.
    10. Xiaolong Liu & Weidong Qu, 2015. "Winner's Curse or Signaling? Bidding Outcomes in the Chinese Land Market," International Real Estate Review, Global Social Science Institute, vol. 18(1), pages 113-129.
    11. Atrayee Ghosh Roy, 2018. "Infrastructure Investment and the Indian Economy," Bulletin of Applied Economics, Risk Market Journals, vol. 5(1), pages 29-38.
    12. I-Chun Tsai & Shu-Hen Chiang, 2018. "Risk Transfer among Housing Markets in Major Cities in China," Sustainability, MDPI, vol. 10(7), pages 1-20, July.
    13. KWON, Heeeun & HWANG, Beom Seuk, 2023. "Do Spatial Characteristics Affect Housing Prices in Korea? : Evidence from Bayesian Spatial Models," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 64(2), pages 109-124, December.
    14. Erol, Isil & Unal, Umut, 2015. "Role of Construction Sector in Economic Growth: New Evidence from Turkey," MPRA Paper 68263, University Library of Munich, Germany.
    15. Yuekai Cheng & Hongyi Li & Qi Sun & Yu Wang, 2019. "A Model of Household Savings and Alternative Investments in Rural China," Asian Economic Papers, MIT Press, vol. 18(2), pages 145-162, Summer.
    16. Basakha, Mehdi & Hossein Mohaqeqi Kamal, Seyed, 2019. "Industrial development and social welfare: A case study of Iran," Socio-Economic Planning Sciences, Elsevier, vol. 68(C).
    17. Chen Zhu & Da Zhao & Zhiyi Qiu, 2019. "Internal and External Effect of Estate Investment upon Regional Innovation in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 55(3), pages 513-530, February.
    18. Nuri Hacıevliyagil & Krzysztof Drachal & Ibrahim Halil Eksi, 2022. "Predicting House Prices Using DMA Method: Evidence from Turkey," Economies, MDPI, vol. 10(3), pages 1-27, March.
    19. Honghao Ren & Henk Folmer & Arno Vlist, 2014. "What role does the real estate–construction sector play in China’s regional economy?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 839-857, May.
    20. Shi, Song & Zhang, Hong & Zhang, Jun, 2022. "The impact of a home purchase restrictions (HPR) policy on the distressed property market in Beijing," Journal of Housing Economics, Elsevier, vol. 58(PB).
    21. Mr. Steven A Barnett & Mr. R. Brooks, 2006. "What’s Driving Investment in China?," IMF Working Papers 2006/265, International Monetary Fund.
    22. Kazuya Tani & Yoshiyuki Kikuchi & Hideo Takaoka & Shubin Lin, 2014. "Housing Acquisition Process for Public Housing and Commodity Housing in Shanghai: A Survey of Residents," International Real Estate Review, Asian Real Estate Society, vol. 17(3), pages 415-444.
    23. Vusal Murselzade & Behiye Cavusoglu, 2021. "Relationship between the Service Sector and Economic Growth: Evidence from China," Asian Journal of Social Sciences and Management Studies, Asian Online Journal Publishing Group, vol. 8(1), pages 15-22.

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    More about this item

    Keywords

    Economic growth; housing investment; non-housing investment; Granger causality; cointegration; error correction model;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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