Global Development Policy Center

  • GDP中心中文网站
  • Connect
  • News
  • Events
Menu Search
  • About Us
    • Mission
    • Careers
    • Connect
    • Streeten Lectureship
    • Become an Affiliate Faculty Member
  • Research
    • D.A.T.A.
    • Global China
    • Global Economic Governance
    • Human Capital
    • Land Use and Livelihoods
    • Core Faculty Seed Grants
  • Education
    • Economics in Context Initiative (ECI)
    • Journal of Globalization and Development
    • Seeing and Not Seeing Faculty Seminar
    • Summer in the Field
  • Publications
    • on Global China
    • on Global Economic Governance
    • on Human Capital
    • Publications by Year
  • Blog
  • People
    • GDP Center Leadership
    • Research & Staff Teams
    • Alumni Advisory Board
    • Affiliate Faculty Members
  • GDP中心中文网站
  • Connect
  • News
  • Events
Search

Housing Price Volatility and the Capital Account in China

Beijing, China. Photo by Tao Yuan via Unsplash.

China experienced significant volatility in its housing market from 2005-2013. Economists analyzing the determinants of volatility in these markets find that the bubble was largely driven by factors specific to the Chinese economy and Chinese economic policy.

In a 2015 working paper, Yuan Tian and Kevin P. Gallagher examine the extent to which short-term capital flows impacted China’s housing prices and their volatility. They also assess the effectiveness of China’s 2006 Capital Account Regulations (CARs) on foreign purchases of Chinese real estate in reducing the level and volatility of prices in China’s housing markets.

Main findings:
  • Short-term capital flows from abroad had a modest impact on price increase in the Chinese housing market, but a more significant impact on increasing market volatility. 
  • China’s 2006 CAR policy measures did not appear to have an impact on reducing housing prices, but had a strong impact on reducing volatility in the Chinese housing market.
  • Hot money, another term for short-term capital flows, magnified the impacts of capital flows on housing prices during upward surges in the housing price. 
  • The more volatile the housing market became the larger the impact short-term capital flows had on accentuating such volatility. 
  • The 2006 CARs continued to have a strong impact on reducing volatility in the Chinese housing market between 2005-2013.

China’s housing bubble has appeared to ebb to some degree, but as China liberalizes its capital account, it will have to devise mechanisms to evaluate the impact of capital flows on asset prices and may need to resort to temporary regulations on capital inflows. The authors believe these policies can be moderately effective. 

Read the Working Paper

Housing Price Volatility and the Capital Account in China

Posted10 years ago on Saturday, June 20th, 2015

Tweets by GDP_Center

Donate

Mailing Lists

Stay on top of all our news and events. Sign up for our newsletters

Connect on Social

facebook_circle-128  twitter_circle_color-128  linkedin-circle-icon-128  play-icon-128
Boston University Global Development Policy Center 53 Bay State Road, Boston, MA 02215
  • Pardee School of Global Studies