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The Interaction between Housing Investment and Economic Growth in China

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
Contact details of provider: Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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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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  8. Brito, Paulo M. B. & Pereira, Alfredo M., 2002. "Housing and Endogenous Long-Term Growth," Journal of Urban Economics, Elsevier, vol. 51(2), pages 246-271, March.
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  16. Yi Wen, 2001. "Residential Investment and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 2(2), pages 437-444, November.
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