Is housing collateral important to the business cycle? Evidence from China

Yue Gai, A. Patrick Minford and Zhirong Ou

Journal of International Money and Finance, 2020, vol. 109, issue C

Abstract: This paper investigates whether housing collateral is important to the business cycle in China. We develop two models, one without housing collateral as benchmark and one variant allowing for it. Indirect Inference procedure tests these two models’ compatibility with the data. We find that the benchmark model passes the test, while the collateral model is strongly rejected. According to the benchmark model, shocks from the housing market have limited impact on the Chinese business cycle. By contrast, the exogenous spending shock from government and net exports, the monetary policy shock and the goods-sector cost/productivity shock, all in turn most likely connected to world business cycle shocks (especially the global financial crisis), are found to be the main drivers.

Keywords: Housing market; DSGE model; Housing collateral; Indirect inference; China (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 R31 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:109:y:2020:i:c:s0261560620301728

DOI: 10.1016/j.jimonfin.2020.102216

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