The crowding out channel: Housing boom and investment in China

He Zhang and Xianchun Meng

Finance Research Letters, 2021, vol. 43, issue C

Abstract: We develop a novel mechanism that captures the negative co-movements between housing prices and investment in China by incorporating the crowding out channel into a NK-DSGE model. Through this channel, a credit-driven housing boom stimulates constrained commercial banks to allocate more credit to the unproductive household sector instead of entrepreneur sector, crowding out corporate investment.

Keywords: Housing prices dynamics; Credit constraints; Crowding-out channel (search for similar items in EconPapers)
JEL-codes: E22 E32 E44 E58 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321000404

DOI: 10.1016/j.frl.2021.101959

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