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The Impact of Exogenous Demand Shock on the Housing Market: Evidence from the Home Purchase Restriction Policy in the People’s Republic of China

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  • Cao, Xiaping

    (Asian Development Bank Institute)

  • Huang, Bihong

    (Asian Development Bank Institute)

  • Lai, Rose Neng

    (Asian Development Bank Institute)

Abstract

To deal with the rampant increase in housing prices, the Government of the PRC implemented the home purchase restriction (HPR) policy to curb speculation and prevent housing bubbles. This policy triggered an exogenous demand shock to the housing market. Employing a two-step difference-in-differences approach, we find significantly negative policy effects on property transaction volume but a small impact on housing prices. Cities that rely heavily on land sales for fiscal revenue experience a considerably higher increase in property investments after implementing the HPR policy.

Suggested Citation

  • Cao, Xiaping & Huang, Bihong & Lai, Rose Neng, 2018. "The Impact of Exogenous Demand Shock on the Housing Market: Evidence from the Home Purchase Restriction Policy in the People’s Republic of China," ADBI Working Papers 824, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0824
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    More about this item

    Keywords

    home purchase restriction policy; demand shock; housing bubble; land financing;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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