Does money supply drive housing prices in China?Chi-Wei Su, Xiao-Qing Wang, Ran Tao and Hsu-Ling Chang International Review of Economics & Finance, 2019, vol. 60, issue C, 85-94 Abstract: This study explores the causality between housing prices and money supply in order to support the dynamic equilibrium model in China. Considering structural changes, the long-run nexus using full-sample data is found to be unstable, suggesting the causality test is not reliable. Instead a time-varying rolling-window approach is employed to revisit the dynamic causal relationship. The results highlight the existence of a bidirectional causal link between housing prices and money supply in China. Specifically, soar and crash of housing prices manifest both positive and negative impacts on money supply in different sub-periods. In turn, money supply has a positive impact on housing prices, which supports the dynamic equilibrium model. In order to support a relatively stable housing price level, especially during structural economic changes, it is critical to facilitate the pegged money supply precautionary control and insure a reasonable and stable level of money supply into the real estate market. Keywords: Money supply; Housing price; Rolling window; Bootstrap; Time-varying causality (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:60:y:2019:i:c:p:85-94 DOI: 10.1016/j.iref.2018.12.013 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
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