{"title":"Has fiscal expansion inflated house prices in China? Evidence from an estimated DSGE model","authors":"","doi":"10.1016/j.iref.2024.103541","DOIUrl":null,"url":null,"abstract":"<div><p>We evaluate the impacts of government spending and government investment on the house price dynamics in China during its Great Housing Boom. Government spending is defined as public expenditures on non-productive public goods and services, while government investment is defined as expenditures on productive public capital. By estimating a DSGE model which allows for potential non-separability between government spending and housing in household utility, and a policy feedback rule governing government investment, we find: (a) government spending exhibits a crowding-out effect on housing consumption, though empirically it does not affect the housing price much; (b) government investment, which exhibits a strong wealth effect on household income and then the demand for houses, affects the housing price positively and substantially; (c) both government spending and government investment are effective instruments for stimulating output, but given that government investment can inflate house prices unnecessarily, policy makers who aim to stimulate the economy without destabilising the housing market would be better off utilising government spending.</p></div>","PeriodicalId":14444,"journal":{"name":"International Review of Economics & Finance","volume":null,"pages":null},"PeriodicalIF":4.8000,"publicationDate":"2024-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S1059056024005331/pdfft?md5=529eb08b867b859d0af2607665f09c7c&pid=1-s2.0-S1059056024005331-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Economics & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1059056024005331","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
We evaluate the impacts of government spending and government investment on the house price dynamics in China during its Great Housing Boom. Government spending is defined as public expenditures on non-productive public goods and services, while government investment is defined as expenditures on productive public capital. By estimating a DSGE model which allows for potential non-separability between government spending and housing in household utility, and a policy feedback rule governing government investment, we find: (a) government spending exhibits a crowding-out effect on housing consumption, though empirically it does not affect the housing price much; (b) government investment, which exhibits a strong wealth effect on household income and then the demand for houses, affects the housing price positively and substantially; (c) both government spending and government investment are effective instruments for stimulating output, but given that government investment can inflate house prices unnecessarily, policy makers who aim to stimulate the economy without destabilising the housing market would be better off utilising government spending.
期刊介绍:
The International Review of Economics & Finance (IREF) is a scholarly journal devoted to the publication of high quality theoretical and empirical articles in all areas of international economics, macroeconomics and financial economics. Contributions that facilitate the communications between the real and the financial sectors of the economy are of particular interest.