Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212884 
Year of Publication: 
2017
Series/Report no.: 
BOFIT Discussion Papers No. 21/2017
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
The recent increase in China's house prices at the national level masks tremendous variation at the city level – a feature largely overlooked in the macroprudential literature. This paper considers the evolving heterogeneity in China's house price dynamics across 70 cities and assess the main deter-minants. We gauge the heterogeneity of house price dynamics using a novel regime-switching modelling approach to estimate the time-varying patterns of China's city-level housing price synchronization. After sorting city-level housing prices into four clusters sharing similar cyclical features, we see that each group shows increasing synchronization in the years leading up to 2015, and a decoupling pattern thereafter. We document high synchronization within each of the clusters of cities, but low synchronization among them. The empirical evidence suggests that differentials in the growth of households, income, investment and even differences in air quality explain housing price synchronization among cities.
JEL: 
E31
E32
C32
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-202-0
Document Type: 
Working Paper

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