The Impacts of Land and Real Estate Price Fluctuations on Financial Stability: Evidence from China

Jinsong Wang, Wenhui Wu, Yueqiao Li and Qiyuan Yang

Australian Economic Review, 2023, vol. 56, issue 1, 42-60

Abstract: We construct a provincial financial stability index, and use panel vector autoregression to construct a model for empirical testing. We find that local governments' reliance on land grant premiums amplifies the impact on financial stability. In addition, the relationship between the real estate market and the financial system allows real estate price fluctuations to significantly affect market participants, further impacting financial system stability. Finally, in the eastern region, land price fluctuations have a less adverse impact on financial stability, while in other regions, rising commodity real estate prices are the biggest threat to financial stability.

Date: 2023
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https://doi.org/10.1111/1467-8462.12496

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