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Is there a housing bubble in China

Tianhao Zhi, Zhongfei Li, Zhiqiang Jiang, Lijian Wei and Didier Sornette
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Tianhao Zhi: SYU
Zhongfei Li: SYU
Zhiqiang Jiang: ECUST
Lijian Wei: SYU
Didier Sornette: ETH Zurich

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Abstract: There is a growing concern in recent years over the potential formation of bubbles in the Chinese real estate market. This paper aims to conduct a series of bubble diagnostic analysis over nine representative Chinese cities from two aspects. First, we investigate whether the prices had been significantly deviating from economic fundamentals by applying a standard Engle-Granger cointegration test. Second, we apply the Log-Periodic-Power-Law-Singularity (LPPLS) model to detect whether there is any evidence of unsustainable, self-reinforcing speculative behaviours amongst the price series. We propose that, given the heterogeneity that exists amongst cities with different types of bubble signatures, it is vital to conduct bubble diagnostic tests and implement relevant policies toward specific bubble characteristics, rather than enforcing one-that-fits-for-all type policy that does not take into account such heterogeneity.

New Economics Papers: this item is included in nep-cna, nep-tra and nep-ure
Date: 2018-01
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