Has fiscal expansion inflated house prices in China? Evidence from an estimated DSGE model

Chunping Liu () and Zhirong Ou

No E2019/18, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section

Abstract: A canonical DSGE model for housing, extended to embrace government spending and government investment, is estimated on Chinese data to evaluate the impact of fiscal policy on house prices. Government spending substitutes for housing; a rise in government spending lowers house prices, but its impact is weak. Government investment generates a wealth effect, causing housing demand, and therefore prices, to rise; its variation had a substantial impact on the boom-bust cycles of house prices in the past decade. Both government spending and government investment are effective instruments for manipulating output. However, their different impacts on house prices would recommend policies to count more on spending if fiscal expansion is not to sacrifice the stability of house prices.

Keywords: fiscal policy; housing price; China; DSGE model (search for similar items in EconPapers)
JEL-codes: E62 R31 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2019-11
New Economics Papers: this item is included in nep-dge, nep-mac, nep-tra and nep-ure
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Citations: View citations in EconPapers (2)

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Journal Article: Has fiscal expansion inflated house prices in China? Evidence from an estimated DSGE model (2024)
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