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How strong are the linkages between real estate and other sectors in China?

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  • Chan, Steven
  • Han, Gaofeng
  • Zhang, Wenlang

Abstract

International experience points to the critical role of stable property markets in maintaining financial stability. This paper investigates the real and financial linkages between real estate sector and other sectors. The real linkage based on input–output analysis shows that the linkages have strengthened. The financial linkages in terms of credit risk spillovers across sectors are studied by using DAG method and SVAR. We find that that credit risk in the real estate sector has large-scale spillover effects onto other sectors. Consequently, shocks to the property market could have much larger impact on the Chinese economy than suggested by headline figures.

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  • Chan, Steven & Han, Gaofeng & Zhang, Wenlang, 2016. "How strong are the linkages between real estate and other sectors in China?," Research in International Business and Finance, Elsevier, vol. 36(C), pages 52-72.
    • Handle: RePEc:eee:riibaf:v:36:y:2016:i:c:p:52-72
    DOI: 10.1016/j.ribaf.2015.09.018
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    More about this item

    Keywords

    IO analysis; Default likelihood; Financial linkages; DAG; Structural VAR;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • G3 - Financial Economics - - Corporate Finance and Governance

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