Regional House Price Volatility and Its Inter-regional Propagation: Based on a Two-region DSGE Framework and a Spatial Dynamic Panel Data Model

doi:10.16382/j.cnki.1000-5579.2017.01.020

Abstract

Abstract:

Since the housing reform in 1998, housing price all over China has experienced dramatic increase. Besides the uptrend of housing price, two stylized facts deserve special attention. One is that regional housing price shows great volatility. The other is that housing price changes between different regions show significant relevance. We formulate a two-region dynamic stochastic general equilibrium framework where credit contracts are imperfectly enforceable to explain the stylized facts above. First, credit constraints amplify economic shocks to produce great volatility. Second, inter-region borrowing makes it possible for housing price to propagate from one region to another. Last, we prove the existence of the "spillover effect" of regional housing price volatility in China by using spatial econometric models and cross-province panel data.

Key words: house price volatility, inter-regional propagation, DSGE, credit constraint, spatial dynamic panel

GAO Ran, GONG Liu-tang. Regional House Price Volatility and Its Inter-regional Propagation: Based on a Two-region DSGE Framework and a Spatial Dynamic Panel Data Model[J]. Journal of East China Normal University (Philosoph, 2017, 49(1): 154-163.

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