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Real Estate, Interest Rates, and Crowding-out Effects

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  • Tianye Lin

    (China Economics and Management Academy, Central University of Finance and Economics)

  • Yangyang Ji

    (China Economics and Management Academy, Central University of Finance and Economics)

  • Sen Zhang

    (China Economics and Management Academy, Central University of Finance and Economics)

Abstract

In this paper, we reveal robust findings of the co-movement of real-estate loans, real-estate booms, and market interest rates by observing Chinese data and using vector auto-regressions. We construct a two-sector credit market partial equilibrium model to explain this phenomenon. The findings show that rising real-estate prices are a cause for this co-movement. We believe that an expansion in demand for real-estate loans has brought about an increase in interest rates in the credit market since 2002, which has crowded-out credit for the non-land sector. We also find that rising real-estate prices can lead to expansion in demand for real-estate loans.

Suggested Citation

  • Tianye Lin & Yangyang Ji & Sen Zhang, 2020. "Real Estate, Interest Rates, and Crowding-out Effects," CEMA Working Papers 613, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:613
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    References listed on IDEAS

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