Arbeitspapier

Is there a bubble in the Chinese housing market?

For many analysts, the Chinese economy is spurred by a bubble in the housing market, probably driven by the fiscal stimulus package and massive credit expansion, with possible adverse effects to the real economy. To get insights into the size of the bubble, the house price evolution is investigated by panel cointegration techniques. Evidence is based on a dataset for 35 major cities. Cointegration is detected between real house prices and a set of macroeconomic determinants, implying that a bubble exhibits mean-reverting behaviour. The results indicate that the bubble is about 25 percent of the equilibrium value implied by the fundamentals at the end of 2009. The bubble is particularly huge in the cities in the southeast coastal areas and special economic zones. While the impact of real house prices on CPI inflation appears to be rather strong, GDP growth may not be heavily affected. Thus, a decline of the bubble will likely have only modest effects on the real economy.

Language
Englisch

Bibliographic citation
Series: Discussion Paper ; No. 290

Classification
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Subject
Chinese economy
panel cointegration
house price bubbles
Immobilienpreis
Bubbles
Makroökonomischer Einfluss
Kointegration
Schätzung
China

Event
Geistige Schöpfung
(who)
Dreger, Christian
Zhang, Yanqun
Event
Veröffentlichung
(who)
European University Viadrina, Department of Business Administration and Economics
(where)
Frankfurt (Oder)
(when)
2010

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Dreger, Christian
  • Zhang, Yanqun
  • European University Viadrina, Department of Business Administration and Economics

Time of origin

  • 2010

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