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The impact of housing price on non-housing consumption of the Chinese households: A general equilibrium analysis

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  • Liu, Lu
  • Wang, Qiuyun
  • Zhang, Anquan

Abstract

In recent years, the absolute values of the housing price and the households’ non-housing consumption in China are both on the rise, but many documents studying on the impact that the ever-changing housing price exerts on Chinese households’ consumption consider that the rise of housing price represses the households’ consumption expenditure. This paper constructs a general equilibrium model to explain the impact of housing price changes on the consumption expenditure of urban residents. The result shows that the rise in housing prices has both crowding-out and wealth effects for households’ consumption. Further, the empirical test shows that during the period of “2006–2010”, for every 1% rise in housing prices, the total retail sales of consumer goods falls by 0.332%; and to the contrast, during the “2011–2015” period, for every 1% rise in housing price, the total retail sales of consumer goods are increased by 0.207%. The above results indicate that along with the increase in housing holding areas, the impact of housing price changes on households’ consumption has gradually shifted from the crowding-out effect to the wealth effect. We also find out that external speculative demand makes the impact of housing price rise on local residents’ consumption manifested as the crowding-out effect. However, in the regions with weaker external speculative demand, the impact of housing price changes on households’ consumption is mainly shown as the wealth effect.

Suggested Citation

  • Liu, Lu & Wang, Qiuyun & Zhang, Anquan, 2019. "The impact of housing price on non-housing consumption of the Chinese households: A general equilibrium analysis," The North American Journal of Economics and Finance, Elsevier, vol. 49(C), pages 152-164.
  • Handle: RePEc:eee:ecofin:v:49:y:2019:i:c:p:152-164
    DOI: 10.1016/j.najef.2019.04.010
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    Cited by:

    1. Lu Liu & Linda Qiu & Yuanyuan Yang, 2022. "Urban housing prices within a core urban agglomeration in China," SN Business & Economics, Springer, vol. 2(11), pages 1-38, November.
    2. Huazhu Zheng & Jiao Qian & Guihuan Liu & Yongjiao Wu & Claudio O. Delang & Hongming He, 2023. "Housing prices and household consumption: a threshold effect model analysis in central and western China," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-16, December.
    3. Liu, Lu, 2023. "Mortgage loan and housing market," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 736-749.

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    More about this item

    Keywords

    Housing price; Households’ consumption; Wealth effect; Crowding-out effect;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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