House Prices and Household Consumption in Korea

This paper studies the relationships among monetary policy, house prices, and consumption in China from both national and regional perspectives. Using a panel vector autoregression (VAR) model and a counterfactual simulation method, we find that monetary policy has a significant effect on consumption but with a regional pattern, in terms of the magnitude and the housing wealth channel. It is found that in the middle southern and the western cities, the monetary policy has strong effects on consumption while the house prices have minimal contribution to the monetary policy transmission to household consumption. By contrast, in the Tier-1 and the eastern cities, house prices play a more important role in monetary policy transmission; even household consumption is less sensitive to monetary policy changes.

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House price and household consumption in China: evidence from micro-level data

International Journal of Housing Markets and Analysis ◽

10.1108/ijhma-10-2019-0103 ◽

2020 ◽

Vol 13 (3) ◽

pp. 475-501

Author(s):

Xiaojun Yuan ◽

Yinjie Shen ◽

Haigang Zhou

Keyword(s):

House Prices ◽

House Price ◽

Household Consumption ◽

Data Set ◽

Vast Number ◽

Content Type ◽

Level Data ◽

Micro Level ◽

Chinese Housing Market ◽

The Relationship

Purpose This paper aims to identify how house price affects household consumption. Design/methodology/approach The authors use a micro-level data set that tracks the house price and consumption of a vast number of households over a period of four years. OLS regression is the main econometric method. Findings The authors document robust evidence that an increase in house prices stimulates household consumption, regardless of whether a household owns or rents. Moreover, the authors find that both acquiring and losing homeownership negatively affects household consumption. Further investigation suggests significant regional heterogeneity in the relationship between house prices and household consumption. Originality/value This is one of the first studies examining the relationship between house price and household consumption in China using micro-level data. Given the uniqueness of the Chinese housing market and China’s fast-growing consumption rate, the study contributes new evidence to the long-lasting debate.

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