U.S. Housing as a Global Safe Asset: Evidence from China Shocks

William Barcelona, Nathan Converse and Anna Wong
Additional contact information
Nathan Converse: https://www.federalreserve.gov/econres/nathan-l-converse.htm

No 1332, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper demonstrates that the measured stock of China's holding of U.S. assets could be much higher than indicated by the U.S. net international investment position data due to unrecorded historical Chinese inflows into an increasingly popular global safe haven asset: U.S. residential real estate. We first use aggregate capital flows data to show that the increase in unrecorded capital inflows in the U.S. balance of payment accounts over the past decade is mainly linked to inflows from China into U.S. housing markets. Then, using a unique web traffic dataset that provides a direct measure of Chinese demand for U.S. housing at the zip code level, we estimate via a difference-in-difference matching framework that house prices in major U.S. cities that are highly exposed to demand from China have on average grown 7 percentage points faster than similar neighborhoods with low exposure over the period 2010-2016. These average excess price growth gaps co-move closely with macro-level measures of U.S. capital inflows from China, and tend to widen following periods of economic stress in China, suggesting that Chinese households view U.S. housing as a safe haven asset.

Keywords: China; Housing and real estate; Capital flows; Safe assets (search for similar items in EconPapers)
JEL-codes: F30 F60 R30 (search for similar items in EconPapers)
Date: 2021-11-12
New Economics Papers: this item is included in nep-acc, nep-cna, nep-fmk, nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.federalreserve.gov/econres/ifdp/files/ifdp1332.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1332

DOI: 10.17016/IFDP.2021.1332

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().