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Real-time warning signs of emerging and collapsing Chinese house price bubbles

  • Funke, Michael

    ()

    (BOFIT)

  • Chen, Xi

    (BOFIT)

The recent increase in Chinese house prices has led to concerns that China is vulnerable to asset price shocks. In this paper, we apply recently developed recursive unit root tests to spot the beginning and the end of potential speculative bubbles in Chinese house price cycles. Overall, we find that except for 2009–2010 actual house prices are not significantly disconnected from fundamentals. Thus, the evidence for speculative house price bubbles in China is in general weak.

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File URL: http://www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/2012/dp2712.pdf
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Paper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 27/2012.

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Length: 25 pages
Date of creation: 14 Nov 2012
Date of revision:
Handle: RePEc:hhs:bofitp:2012_027
Contact details of provider: Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
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Web page: http://www.suomenpankki.fi/bofit_en/
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  1. Yu-Fu Chen & Michael Funke & Aaron Mehrotra, 2011. "What Drives Urban Consumption in Mainland China? The Role of Property Price Dynamics," Working Papers 152011, Hong Kong Institute for Monetary Research.
  2. Peter C. B. Phillips & Jun Yu, 2009. "Dating the Timeline of Financial Bubbles During the Subprime Crisis," Working Papers 18-2009, Singapore Management University, School of Economics.
  3. Zemcik, Petr & Mikhed, Vyacheslav, 2009. "Do House Prices Reflect Fundamentals? Aggregate and Panel Data Evidence," ERES eres2009_275, European Real Estate Society (ERES).
  4. Vyacheslav Mikhed & Petr Zemcik, 2007. "Do House Prices Reflect Fundamentals? Aggregate and Panel Data Evidence," CERGE-EI Working Papers wp337, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  5. Stephen J. Leybourne & Tae-Hwan Kim & A. M. Robert Taylor, 2006. "Regression-based Tests for a Change in Persistence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(5), pages 595-621, October.
  6. Ren, Yu & Xiong, Cong & Yuan, Yufei, 2012. "House price bubbles in China," China Economic Review, Elsevier, vol. 23(4), pages 786-800.
  7. Narayana Kocherlakota & Ilhyock Shim, 2005. "Forbearance and Prompt Corrective Action," Levine's Bibliography 666156000000000532, UCLA Department of Economics.
  8. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions," NBER Working Papers 11643, National Bureau of Economic Research, Inc.
  9. Yener Altunbas & Leonardo Gambacorta & David Marques-Ibanez, 2010. "Does monetary policy affect bank risk-taking?," BIS Working Papers 298, Bank for International Settlements.
  10. M. Funke & S. Hall & M. Solá, 1993. "Rational bubbles during Polland’s hiperinflation: implications and empirical evidence," Documentos de Trabajo (working papers) 1193, Department of Economics - dECON.
  11. Ciarlone, Alessio, 2011. "Housing wealth effect in emerging economies," Emerging Markets Review, Elsevier, vol. 12(4), pages 399-417.
  12. Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-30, September.
  13. Busetti, Fabio & Taylor, A. M. Robert, 2004. "Tests of stationarity against a change in persistence," Journal of Econometrics, Elsevier, vol. 123(1), pages 33-66, November.
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