What drives urban consumption in mainland China? The role of property price dynamics.

TY - JOUR

T1 - What drives urban consumption in mainland China? The role of property price dynamics.

AU - Chen, Yu-Fu

AU - Funke, Michael

AU - Mehrotra, Aaron

N1 - © 2016 John Wiley & Sons Australia, Ltd.

PY - 2017/8/27

Y1 - 2017/8/27

N2 - 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 data set 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.

AB - 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 data set 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.

U2 - 10.1111/1468-0106.12078

DO - 10.1111/1468-0106.12078

M3 - Article

SN - 1468-0106

VL - 22

SP - 383

EP - 409

JO - Pacific Economic Review

JF - Pacific Economic Review

IS - 3

ER -