IDEAS home Printed from https://ideas.repec.org/a/sae/urbstu/v53y2016i16p3493-3509.html
   My bibliography  Save this article

Rising residential rents in Chinese mega cities: The role of monetary policy

Author

Listed:
  • Shu-hen Chiang

Abstract

Although there have been a large number of studies carried out on fluctuations in housing prices, little is known about what causes changes in residential rents, which are inextricably intertwined with urban living standards. This is especially noteworthy in Chinese cities, which are now being challenged by the housing market frenzies. Shift-share analysis is proposed to evaluate all possible triggers of residential rent inflation in three cities during the 2001–2013 period, which covers two distinct monetary policy regimes in China. It is found that the recent rise in residential rent comes as a result of aggregate inflation associated with an expansionary monetary policy since the 2008 Global Financial Crisis and an all-encompassing and stable policy stance should therefore be adopted.

Suggested Citation

  • Shu-hen Chiang, 2016. "Rising residential rents in Chinese mega cities: The role of monetary policy," Urban Studies, Urban Studies Journal Limited, vol. 53(16), pages 3493-3509, December.
    • Handle: RePEc:sae:urbstu:v:53:y:2016:i:16:p:3493-3509
    DOI: 10.1177/0042098015613753
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0042098015613753
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0042098015613753?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Uwe Hassler & Michael Neugart, 2003. "Inflation-unemployment tradeoff and regional labor market data," Empirical Economics, Springer, vol. 28(2), pages 321-334, April.
    2. Jean Imbs & Haroon Mumtaz & Morten O. Ravn & Hélène Rey, 2005. "PPP Strikes Back: Aggregation And the Real Exchange Rate," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(1), pages 1-43.
    3. Carol Alexander & Michael Barrow, 1994. "Seasonality and Cointegration of Regional House Prices in the UK," Urban Studies, Urban Studies Journal Limited, vol. 31(10), pages 1667-1689, December.
    4. Markus K. Brunnermeier & Christian Julliard, 2008. "Money Illusion and Housing Frenzies," The Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 135-180, January.
    5. Aysoy, Cem & Aysoy, Cevriye & Tumen, Semih, 2014. "Quantifying and explaining stickiness in housing rents: A Turkish case study with micro-level data," Journal of Housing Economics, Elsevier, vol. 25(C), pages 62-74.
    6. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
    7. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    8. Altissimo, Filippo & Mojon, Benoit & Zaffaroni, Paolo, 2009. "Can aggregation explain the persistence of inflation?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 231-241, March.
    9. Shimizu, Chihiro & Nishimura, Kiyohiko G. & Watanabe, Tsutomu, 2010. "Residential rents and price rigidity: Micro structure and macro consequences," Journal of the Japanese and International Economies, Elsevier, vol. 24(2), pages 282-299, June.
    10. Chengsi Zhang, 2011. "Why is Inflation in China a Monetary Phenomenon?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 19(3), pages 1-17, May.
    11. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    12. Barbara Roffia & Andrea Zaghini, 2007. "Excess Money Growth and Inflation Dynamics," International Finance, Wiley Blackwell, vol. 10(3), pages 241-280, December.
    13. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
    14. Hervé Le Bihan & Julien Matheron, 2012. "Price Stickiness and Sectoral Inflation Persistence: Additional Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(7), pages 1427-1442, October.
    15. Coulson N. Edward & Rushen Steven F., 1995. "Sources of Fluctuations in the Boston Economy," Journal of Urban Economics, Elsevier, vol. 38(1), pages 74-93, July.
    16. Angela Black & Patricia Fraser & Martin Hoesli, 2006. "House Prices, Fundamentals and Bubbles," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9‐10), pages 1535-1555, November.
    17. Pierre L. Siklos & Yang Zhang, 2010. "Identifying The Shocks Driving Inflation In China," Pacific Economic Review, Wiley Blackwell, vol. 15(2), pages 204-223, May.
    18. Anping Chen & Mark D. Partridge, 2013. "When are Cities Engines of Growth in China? Spread and Backwash Effects across the Urban Hierarchy," Regional Studies, Taylor & Francis Journals, vol. 47(8), pages 1313-1331, September.
    19. Clark, Todd E, 1998. "Employment Fluctuations in U.S. Regions and Industries: The Roles of National, Region-Specific, and Industry-Specific Shocks," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 202-229, January.
    20. Guenter W. Beck & Kirstin Hubrich & Massimiliano Marcellino, 2009. "Regional inflation dynamics within and across euro area countries and a comparison with the United States [‘On the relevance and nature of regional inflation differentials: The case of Spain’, Banc," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(57), pages 142-184.
    21. Ali Anari & James Kolari, 2002. "House Prices and Inflation," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(1), pages 67-84.
    22. Nagayasu, Jun, 2011. "Heterogeneity and convergence of regional inflation (prices)," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 711-723.
    23. Hasan, Mohammad S., 1999. "Monetary Growth and Inflation in China: A Reexamination," Journal of Comparative Economics, Elsevier, vol. 27(4), pages 669-685, December.
    24. Frédéric Gaschet, 2002. "articles: The new intra-urban dynamics: Suburbanisation and functional specialisation in French cities," Papers in Regional Science, Springer;Regional Science Association International, vol. 81(1), pages 63-81.
    25. Mehrotra, Aaron & Peltonen, Tuomas & Santos Rivera, Alvaro, 2010. "Modelling inflation in China--A regional perspective," China Economic Review, Elsevier, vol. 21(2), pages 237-255, June.
    26. Joshua Gallin, 2008. "The Long‐Run Relationship Between House Prices and Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 635-658, December.
    27. Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2010. "Rents Have Been Rising, Not Falling, in the Postwar Period," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 628-642, August.
    28. Angela Black & Patricia Fraser & Martin Hoesli, 2006. "House Prices, Fundamentals and Bubbles," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9‐10), pages 1535-1555, November.
    29. David Genesove, 2003. "The Nominal Rigidity of Apartment Rents," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 844-853, November.
    30. Aoki, Kosuke, 2001. "Optimal monetary policy responses to relative-price changes," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 55-80, August.
    31. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
    32. Mustafa Dinc & Kingsley E. Haynes, 1999. "Sources of regional inefficiency An integrated shift-share, data envelopment analysis and input-output approach," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 33(4), pages 469-489.
    33. Carlino, Gerald A. & DeFina, Robert H. & Sill, Keith, 2001. "Sectoral Shocks and Metropolitan Employment Growth," Journal of Urban Economics, Elsevier, vol. 50(3), pages 396-417, November.
    34. Dennis Tao Yang, 1999. "Urban-Biased Policies and Rising Income Inequality in China," American Economic Review, American Economic Association, vol. 89(2), pages 306-310, May.
    35. Diewert, W. Erwin & Nakamura, Alice O. & Nakamura, Leonard I., 2009. "The housing bubble and a new approach to accounting for housing in a CPI," Journal of Housing Economics, Elsevier, vol. 18(3), pages 156-171, September.
    36. Ogonna Nneji & Chris Brooks & Charles Ward, 2013. "Commercial Real Estate and Equity Market Bubbles: Are They Contagious to REITs?," Urban Studies, Urban Studies Journal Limited, vol. 50(12), pages 2496-2516, September.
    37. Randal Verbrugge & Robert Poole, 2010. "Explaining the Rent–OER Inflation Divergence, 1999–2007," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 633-657, Winter.
    38. Coulson, N. Edward, 1999. "Sectoral sources of metropolitan growth," Regional Science and Urban Economics, Elsevier, vol. 29(6), pages 723-743, November.
    39. Shu-hen Chiang, 2014. "Housing Markets in China and Policy Implications: Comovement or Ripple Effect," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(6), pages 103-120, November.
    40. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    41. Gordon F. Mulligan & Andreas Molin, 2004. "Estimating population change with a two-category shift-share model," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 38(1), pages 113-130, March.
    42. Chihiro Shimizu & Kiyohiko G. Nishimura & Tsutomu Watanabe, 2010. "Residential Rents and Price Rigidity: Micro Structure and Macro Consequences," NBER Chapters, in: Sticky Prices and Inflation Dynamics (NBER-TCER-CEPR), pages 282-299, National Bureau of Economic Research, Inc.
    43. W. Erwin Diewert & Alice O. Nakamura, 2009. "Accounting for housing in a CPI," Working Papers 09-4, Federal Reserve Bank of Philadelphia.
    44. Chengsi Zhang & Guojun An & Xin Yu, 2012. "What Drives China's House Prices: Marriage or Money?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 20(4), pages 19-36, July.
    45. Deng, Yongheng & Gabriel, Stuart A & Nothaft, Frank E, 2003. "Duration of Residence in the Rental Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 267-285, March-May.
    46. Hoffmann, Johannes & Kurz-Kim, Jeong-Ryeol, 2006. "Consumer price adjustment under the microscope: Germany in a period of low inflation," Discussion Paper Series 1: Economic Studies 2006,16, Deutsche Bundesbank.
    47. Brun, J. F. & Combes, J. L. & Renard, M. F., 2002. "Are there spillover effects between coastal and noncoastal regions in China?," China Economic Review, Elsevier, vol. 13(2-3), pages 161-169.
    48. Frédéric Gaschet, 2002. "The new intra-urban dynamics: Suburbanisation and functional specialisation in French cities," Post-Print hal-00168331, HAL.
    49. Coulson N. Edward, 1993. "The Sources of Sectoral Fluctuations in Metropolitan Areas," Journal of Urban Economics, Elsevier, vol. 33(1), pages 76-94, January.
    50. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    51. Zhang, Chengsi, 2013. "Money, housing, and inflation in China," Journal of Policy Modeling, Elsevier, vol. 35(1), pages 75-87.
    52. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    53. Robert M. Coen, 1999. "The NAIRU and Wages in Local Labor Markets," American Economic Review, American Economic Association, vol. 89(2), pages 52-57, May.
    54. Shu‐hen Chiang, 2012. "The sources of metropolitan unemployment fluctuations in the Greater Taipei metropolitan area," Papers in Regional Science, Wiley Blackwell, vol. 91(4), pages 775-793, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yongsheng Jiang & Dong Zhao & Andrew Sanderford & Jing Du, 2018. "Effects of Bank Lending on Urban Housing Prices for Sustainable Development: A Panel Analysis of Chinese Cities," Sustainability, MDPI, vol. 10(3), pages 1-16, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chiang, Shu-Hen & Lee, Chien-Chiang & Liao, Ying, 2021. "Exploring the sources of inflation dynamics: New evidence from China," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 313-332.
    2. Shu‐hen Chiang, 2012. "The sources of metropolitan unemployment fluctuations in the Greater Taipei metropolitan area," Papers in Regional Science, Wiley Blackwell, vol. 91(4), pages 775-793, November.
    3. Tsai, I-Chun & Chiang, Shu-Hen, 2019. "Exuberance and spillovers in housing markets: Evidence from first- and second-tier cities in China," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 75-86.
    4. Ambrose, Brent W. & Coulson, N. Edward & Yoshida, Jiro, 2017. "Inflation Rates Are Very Different When Housing Rents Are Accurately Measured," HIT-REFINED Working Paper Series 71, Institute of Economic Research, Hitotsubashi University.
    5. O’Toole, Conor & Martinez-Cillero, Maria & Ahrens, Achim, 2021. "Price regulation, inflation, and nominal rigidity in housing rents," Journal of Housing Economics, Elsevier, vol. 52(C).
    6. Suzuki, Masatomo & Asami, Yasushi & Shimizu, Chihiro, 2021. "Housing rent rigidity under downward pressure: Unit-level longitudinal evidence from Tokyo," Journal of Housing Economics, Elsevier, vol. 52(C).
    7. Gallin, Joshua & Verbrugge, Randal J., 2019. "A theory of sticky rents: Search and bargaining with incomplete information," Journal of Economic Theory, Elsevier, vol. 183(C), pages 478-519.
    8. Cheng-Wen Lee & Shu-Hen Chiang & Zhong-Qin Wen, 2023. "Pursuing the Sustainability of Real Estate Market: The Case of Chinese Land Resources Diversification," Sustainability, MDPI, vol. 15(7), pages 1-19, March.
    9. Randal Verbrugge & Alan Dorfman & William Johnson & Fred Marsh III & Robert Poole & Owen Shoemaker, 2017. "Determinants of Differential Rent Changes: Mean Reversion versus the Usual Suspects," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(3), pages 591-627, July.
    10. Ida, Daisuke, 2020. "Sectoral inflation persistence and optimal monetary policy," Journal of Macroeconomics, Elsevier, vol. 65(C).
    11. Cathal Coffey & Kieran McQuinn & Conor O'Toole, 2022. "Rental equivalence, owner‐occupied housing, and inflation measurement: Microlevel evidence from Ireland," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(4), pages 990-1021, December.
    12. Agnieszka Leszczynska & Katarzyna Hertel, 2013. "Inflation persistence – a disaggregated approach," EcoMod2013 5692, EcoMod.
    13. Carlino, Gerald A. & DeFina, Robert H., 2004. "How strong is co-movement in employment over the business cycle? Evidence from state/sector data," Journal of Urban Economics, Elsevier, vol. 55(2), pages 298-315, March.
    14. Ofer Raz-Dror, 2019. "The Changes In Rent In Israel During The Years Of The Housing Crisis 2008–2015," Israel Economic Review, Bank of Israel, vol. 17(1), pages 73-116.
    15. Bell, Adrian R. & Brooks, Chris & Killick, Helen, 2022. "The first real estate bubble? Land prices and rents in medieval England c. 1300–1500," Research in International Business and Finance, Elsevier, vol. 62(C).
    16. Russell, Bill & Chowdhury, Rosen Azad, 2013. "Estimating United States Phillips curves with expectations consistent with the statistical process of inflation," Journal of Macroeconomics, Elsevier, vol. 35(C), pages 24-38.
    17. Migliardo, Carlo, 2012. "Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms," Economic Modelling, Elsevier, vol. 29(4), pages 1106-1118.
    18. Mazali, Antonio Alberto & Divino, Jose Angelo, 2010. "Real Wage Rigidity and the New Phillips Curve: The Brazilian Case," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 64(3), September.
    19. Chen, Shyh-Wei & Hsu, Chi-Sheng, 2016. "Threshold, smooth transition and mean reversion in inflation: New evidence from European countries," Economic Modelling, Elsevier, vol. 53(C), pages 23-36.
    20. Russell, Bill, 2013. "Macroeconomics: Science or Faith Based Discipline?," SIRE Discussion Papers 2013-114, Scottish Institute for Research in Economics (SIRE).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:urbstu:v:53:y:2016:i:16:p:3493-3509. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.gla.ac.uk/departments/urbanstudiesjournal .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.