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The role of price spillovers: what is different in China

Author

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  • Xintong Yang

    (Capital University of Economics and Business)

  • Yu Zhang

    (Texas A&M University)

  • Qi Li

    (Texas A&M University)

Abstract

The rapid pace of change in China’s housing market has called particular attention. This paper studies how the housing boom in China was transmitted via spillovers from one local market to another between 2003 and 2012, an episode during which housing prices increased rapidly. We identify the beginning of housing booms of a focal market as the quarters in which each city experienced a positive and statistically significant structural break in its house price growth series, and find that housing booms start first in the Beijing–Tianjin–Hebei region and the Yangtze River Delta region. Further, regression results show that there exist spatial spillover effects both on the extensive margin and intensive margin from the neighboring markets in China, and that the focal city housing market significantly responds to the housing booms in the two economic regions. Controlling market fundamentals does not vary the spillover patterns identified. We conclude that there is a distinctive dynamic spillover process in China that the metropolitan economic regions experience booms first, and then, the booms are transmitted to the geographically adjacent cities.

Suggested Citation

  • Xintong Yang & Yu Zhang & Qi Li, 2021. "The role of price spillovers: what is different in China," Empirical Economics, Springer, vol. 60(1), pages 459-485, January.
    • Handle: RePEc:spr:empeco:v:60:y:2021:i:1:d:10.1007_s00181-020-01989-y
    DOI: 10.1007/s00181-020-01989-y
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    Cited by:

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    3. I-Chun Tsai, 2022. "The connectedness between Hong Kong and China real estate markets: spillover effect and information transmission," Empirical Economics, Springer, vol. 63(1), pages 287-311, July.
    4. Yu, Qing & Hui, Eddie Chi-Man & Shen, Jianfu, 2023. "Do local governments capitalise on the spillover effect in the housing market? Quasi-experimental evidence from house purchase restrictions in China," Land Use Policy, Elsevier, vol. 133(C).
    5. Qi Li & Vasilis Sarafidis & Joakim Westerlund, 2021. "Essays in honor of Professor Badi H Baltagi," Empirical Economics, Springer, vol. 60(1), pages 1-11, January.
    6. Li, Qi & Sarafidis, Vasilis & Westerlund, Joakim, 2020. "Essays in Honor of Professor Badi H Baltagi: Editorial," MPRA Paper 104751, University Library of Munich, Germany.
    7. Harry Aginta, 2024. "Inflation and Spatial Spillovers in a Large Archipelago: Evidence from Indonesia," Economic Papers, The Economic Society of Australia, vol. 43(1), pages 91-103, March.

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    More about this item

    Keywords

    Spatial spillovers; Housing booms; Chinese characteristics;
    All these keywords.

    JEL classification:

    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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