Monetary Policy, Hot Money and Housing Price Growth across Chinese Cities
Tao Jin () and
Working Paper from Harvard University OpenScholar
We use a dynamic hierarchical factor model to identify the national, regional, and local factors of the city-level housing price growth in China from 2005 to 2014. We find that city-specific factors account for a large proportion of the variations in city-level housing price growth for most cities. However, the national factor also plays an important role in explaining the fluctuations of city-level housing price growth rates especially after 2009---the average explaining power of the national factor for housing price growth fluctuations reaches 18%. We use a VAR model to investigate the driving forces of the national factor and find that unexpected PBoC policy and hot money flow changes can affect the national housing prices significantly. A positive monetary policy shock has a significant negative impact on the national factor, which lasts for more than two years. Meanwhile, a positive hot money shock does cause a significant increase in the national factor. However, this effect is relatively transitory and reverses in half a year. Monetary policy also affects the national factor by responding positively to positive hot money and price shocks---the reversed effect of hot money shocks and the negative impact of positive price shocks on the national factor result from the tightening of monetary policy triggered by these shocks.
New Economics Papers: this item is included in nep-cba, nep-cna, nep-mac, nep-mon, nep-tra and nep-ure
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:qsh:wpaper:509596
Access Statistics for this paper
More papers in Working Paper from Harvard University OpenScholar Contact information at EDIRC.
Bibliographic data for series maintained by Richard Brandon ().