BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
What drives urban consumption in mainland China? The role of property price dynamics
(), Michael Funke and Aaron Mehrotra
Abstract: 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 dataset
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
Keywords: consumption; house prices; China; panel data; (follow links to similar papers)
JEL-Codes: C23; E21; O53; R31; (follow links to similar papers)
35 pages, June 21, 2011
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