Real Estate, Interest Rates, and Crowding-out Effects

Tianye Lin (), Yangyang Ji and Sen Zhang ()
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Tianye Lin: China Economics and Management Academy, Central University of Finance and Economics
Sen Zhang: China Economics and Management Academy, Central University of Finance and Economics

No 613, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: In this paper, we reveal robust findings of the co-movement of real-estate loans, real-estate booms, and market interest rates by observing Chinese data and using vector auto-regressions. We construct a two-sector credit market partial equilibrium model to explain this phenomenon. The findings show that rising real-estate prices are a cause for this co-movement. We believe that an expansion in demand for real-estate loans has brought about an increase in interest rates in the credit market since 2002, which has crowded-out credit for the non-land sector. We also find that rising real-estate prices can lead to expansion in demand for real-estate loans.

Pages: 14 pages
Date: 2020
New Economics Papers: this item is included in nep-cna and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:wpaper:613

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