Land finance, land attracting investment and housing price fluctuations in China

Ren Wang and Jie Hou

International Review of Economics & Finance, 2021, vol. 72, issue C, 690-699

Abstract: We study the relationship between government imposed land price discrimination and housing price fluctuation in China. Providing the first DSGE model considering such discrimination, we show that land finance, monetary easing policy, labor preference and housing demand shocks accounts for 39.01%, 24.89%, 14.45% and 9.26% of housing price variation from 2008Q1 to 2017Q4, respectively. Counterfactual simulation proves that the current land price policy in China stimulates the growth of manufacturing sector at the expense of inflated housing cost and reduced multiplier of government spending. We also find that easing monetary policy with land price discrimination contributes to elevated housing price inflation and lowered consumption good price inflation.

Keywords: Land finance; Land attracting investment; Housing price fluctuations; Fiscal multiplier; DSGE; Monetary policy (search for similar items in EconPapers)
JEL-codes: E20 E44 E52 E62 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:72:y:2021:i:c:p:690-699

DOI: 10.1016/j.iref.2020.12.021

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