Financial liberalization and house prices: Evidence from China

Yining Shi

Journal of Banking & Finance, 2022, vol. 145, issue C

Abstract: I investigate whether financial liberalization can affect house prices. I exploit the 2008 US financial crisis as an exogenous shock that negatively affected foreign banks’ operations in China. Using cross-sectional variation in foreign banks’ establishment and asset value, I document that cities with a higher level of financial openness have more volatile house price movements. I also show that the drops in house price growth rates in 2008 were larger for cities with higher withdrawal or exit rates of overseas banks. I exclude alternative explanations for the negative treatment effect, such as shocks to international trade and local economic conditions in 2008. The evidence suggests a credit supply channel. Further analyses show that the negative effect of financial liberalization on the house price growth rate is more pronounced for more geographically constrained cities.

Keywords: Real estate market; House prices; Financial liberalization; Foreign banks; Credit channel (search for similar items in EconPapers)
JEL-codes: F30 G01 G21 R30 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:145:y:2022:i:c:s0378426622002357

DOI: 10.1016/j.jbankfin.2022.106655

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