Capital Spillover, House Prices, and Consumer Spending: Quasi-Experimental Evidence from House Purchase Restrictions

70 Pages Posted: 17 Jan 2020 Last revised: 6 Jul 2021

See all articles by Yinglu Deng

Yinglu Deng

Tsinghua University - PBC School of Finance

Li Liao

Tsinghua University - PBC School of Finance

Jiaheng Yu

Massachusetts Institute of Technology (MIT)

Yu Zhang

Peking University - Guanghua School of Management

Date Written: April 30, 2018

Abstract

We use a unique quasi-experiment – spillovers from the imposition of purchase restrictions on local housing to nearby unregulated cities – to study the effects of out-of-town housing demand on house prices and consumer spending. While these restrictions were effective in containing the local house price surge, they induced capital flight, and sharp abnormal increases in house prices in nearby unregulated cities. The effect of the increases in house prices on consumer spending is positive in the aggregate, but echoing Favilukis and Van Nieuwerburgh (2021), is redistributive – negative for renters and positive for homeowners.

Keywords: out-of-town demand, house prices, wealth effect, consumer spending, capital flight, quasi-experiment

JEL Classification: E21, G12, G18, H23, R21, R51

Suggested Citation

Deng, Yinglu and Liao, Li and Yu, Jiaheng and Zhang, Yu, Capital Spillover, House Prices, and Consumer Spending: Quasi-Experimental Evidence from House Purchase Restrictions (April 30, 2018). PBCSF-NIFR Research Paper, Available at SSRN: https://ssrn.com/abstract=3092107

Yinglu Deng

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Li Liao

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Jiaheng Yu

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Yu Zhang (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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