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Does housing boom lead to credit boom or is it the other way around? The case of China

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  • Shen, Chung-Hua
  • Lee, Yen Hsien
  • Wu, Meng-Wen
  • Guo, Na

Abstract

This study examines the lead–lag relations between the observed correlations of credit and housing price growths during three different sample periods, namely, whole, twin boom, and non-twin boom. We used data from 27 provinces and four municipalities in China. We adopted the panel error correction model to estimate the lead-and-lag relation because the two variables are panel-cointegrated. While we find that bi-directional lead-and-lag relation exists in both markets, the leading effect of housing prices on credit appears to be stronger than the effect of credit on property prices.

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  • Shen, Chung-Hua & Lee, Yen Hsien & Wu, Meng-Wen & Guo, Na, 2016. "Does housing boom lead to credit boom or is it the other way around? The case of China," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 349-367.
    • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:349-367
    DOI: 10.1016/j.iref.2015.10.008
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    2. Yi, Xingjian & Liu, Sheng & Wu, Zhouheng, 2022. "What drives credit expansion worldwide?——An empirical investigation with long-term cross-country panel data," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 225-242.
    3. Czerniak, Adam & Borowski, Jakub & Boratyński, Jakub & Rosati, Dariusz, 2020. "Asset price bubbles in a monetary union: Mind the convergence gap," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 288-302.

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    More about this item

    Keywords

    Credit booms; Housing booms; Panel Granger causality; Panel error correction model;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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