Capital Leakage, House Prices, and Consumer Spending: Quasi-Experimental Evidence from House Purchase Restriction Spillovers

85 Pages Posted: 17 Jan 2020 Last revised: 16 Apr 2021

See all articles by Yinglu Deng

Yinglu Deng

Tsinghua University - School of Economics & Management

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

Employing a unique quasi-experiment – spillovers caused by the imposition of local house purchase restrictions to nearby non-regulated cities, we study the house price and real spending effects of out-of-town housing demand and policy spillovers. The quasi-experiment induces sharp abnormal increases in house prices but not local fundamentals in nearby non-regulated cities, providing plausibly exogenous house price booms. The estimated spending response is positive in the aggregate, and is redistributive echoing Favilukis and Van Nieuwerburgh (forthcoming), negative for renters, but positive for homeowners. Our results suggest that the “pure” housing wealth effect can engineer powerful real consequences.

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

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

Suggested Citation

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

Yinglu Deng

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
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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