House price diffusion and cross-border house price dynamics in Asia

This paper examines lead-lag relationships and the dynamic linkages among cross-border house prices in four Asia countries and cities, including Taiwan, Mainland China, Hong Kong and Singapore. We employ the Johansen (1988) cointegration technique, Toda and Yamamotoís (1995) Granger causality test, the generalized impulse response approach, and variance decomposition analysis to find out the extent and the magnitude of their relationships. Our empirical results of Johansenís (1988) cointegration test shows there is a long-run equilibrium among these four Asian cross-border house prices, implying a diffusion of corss-boder house prices among Taiwan, Mainland China, Hong Kong and Singapore. Second, the results of Toda and Yamamotoís Granger causality test provide evidences of bidirectional relationship of house prices between Taiwan and HongKong, and there is no causality of house prices between Mainland China and HongKong. Besides, Taiwanís house prices can lead Mainland Chinaís house prices. As to the causalities of house prices between Singapore and others, HongKong can lead Singapore, while there are no causalities between Singapore and the others. Furthermore, the impacts of the shocks of house prices from HongKong to Singapore are significantly positive, while the mutual impacts of shocks between any other cross-border house prices are insignificant. Finally, the results of the generalized impulse response approach indicate that house prices of Mainland China is the most exogenous while Taiwan is the most endogenous in the long run.