Housing and macro economy: Evidence from Beijing
||Housing and macro economy: Evidence from Beijing
||Book of Abstracts: 15th Annual European Real Estate Society Conference in Kraków, Poland
||This paper explores the important linkages which may exist between the housing sector and the macroeconomy in Beijing from 1998 to 2007. By estimating the VAR model and impulse responsive model, we find that: (1) Economic conditions including the growth of population, GDP and construction costs are important in housing price appreciation determination. Monetary shocks and regulation degree also play an important role in driving house price fluctuations over the short run. (2) Compared with other countries the price elasticity of new residential investment is lower and the responsiveness of housing supply to demand shocks is weaker especially after the government monopolized land supply in 2003. (3) Housing price appreciations have a significant positive impact on investment, but no evidence of a wealth effect on consumption is obtained. This is consistent the present mortgage market situation in Beijing. (4) There exists a two-way interaction between housing price changes and credit supply. Overall, it shows that housing price changes are playing a more significant role in monetary policy transmission.
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