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The Interaction between Housing Investment and Economic Growth in 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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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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Keywords: Economic growth; housing investment; non-housing investment; Granger causality; cointegration; error correction model;

Find related papers by JEL classification:

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

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  1. 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.
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Cited by:

  1. 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.
  2. 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.
  3. Christian Dreger & Yanqun Zhang, 2011. "Is there a bubble in the Chinese housing market?," ERSA conference papers ersa11p261, European Regional Science Association.
  4. Steven Barnett & Ray Brooks, 2006. "What's Driving Investment in China?," IMF Working Papers 06/265, International Monetary Fund.
  5. 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, vol. 52(3), pages 839-857, May.
  6. 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.

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