What Drives Urban Consumption in Mainland China? The Role of Property Price Dynamics
Hong Kong Institute for Monetary and Financial Research (HKIMR) Research Paper WP No. 15/2011
Pacific Economic Review, Volume 22, Issue 3, August 2017, Pages 383-409
30 Pages Posted: 20 Jun 2011 Last revised: 20 Jul 2022
There are 3 versions of this paper
What Drives Urban Consumption in Mainland China? The Role of Property Price Dynamics
What Drives Urban Consumption in Mainland China? The Role of Property Price Dynamics
What Drives Urban Consumption in Mainland China?: The Role of Property Price Dynamics
Date Written: May 27, 2011
Abstract
This working paper was written by Yu-Fu Chen (University of Dundee), Michael Funke (Hamburg University) and Aaron Mehrotra (Bank of Finland).
This paper adds to the literature on wealth effects on consumption by disentangling house price effects on consumption for mainland China. In a stochastic modelling framework, the riskiness, rate of increase and persistence of house price movements have different implications for the consumption/housing ratio. We exploit the geographical variation in property prices by using a quarterly city-level panel dataset for the period 1998Q1-2009Q4 and rely on a panel error correction model. Overall, the results suggest a significant long run impact of property prices on consumption. They also broadly confirm the predictions from the theoretical model.
Keywords: consumption, house prices, China, panel data
JEL Classification: E21, R31, C23, O53
Suggested Citation: Suggested Citation
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