FINANCIAL DEVELOPMENT AND HOUSING PRICE CHANGES UNDER THE CONDITION OF FINANCIAL CONTROL: EVIDENCE FROM CHINA

Xue Li and Ruo-Xi Zhang ()
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Xue Li: School of Finance, Academic of Financial Risk Research, Capital University of Economics and Business, 121 Zhangjialukou, Fengtai District, Beijing, China
Ruo-Xi Zhang: School of Finance, Academic of Financial Risk Research, Capital University of Economics and Business, 121 Zhangjialukou, Fengtai District, Beijing, China

The Singapore Economic Review (SER), 2021, vol. 66, issue 03, 905-931

Abstract: The impact of financial development on the real estate industry has increased with the degree of financial control. This research presented in this paper divides China’s area into strong and weak regions based on the degree of financial control, and then it studies the relationship between housing price changes and the level of financial development using panel data from the period 1994 to 2018. We find that the level of national sample financial development plays an important role in promoting the housing prices. In areas with strong financial control, financial resources tend to be allocated to the real estate industry, boosting real estate prices. In areas with weak financial control, the role of financial development in promoting real estate prices is not obvious. The funds accumulated by financial institutions are more marketable and independent. We have confirmed these findings by our analysis of the transformation of certain financial control and financial development variables, the application of Panel-VAR estimation methods, and other robustness tests.

Keywords: Financial development; housing prices; financial control; DIF-GMM method; Panel-VAR estimation (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0217590820500708

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