Abstract: Located in Southwest China, Guiyang and Chengdu are two spatially close cities. Hence, their housing markets may move together due to similar macro-regulative policies, short geographical distance, and close trade ties. This paper tested for structural breaks and long-run equilibria for the new housing markets in Guiyang and Chengdu. Data were monthly house price indices over the period from January 2007 to December 2018. We conducted ADF, PP tests, and Perron tests (Model C). Cointegration tests used the Engle-Granger and Johansen methods. We found a long-run relationship, which may be attributed to busy business exchanges and frequent population migration. Guiyang’s home prices were weakly exogenous. In the long run, the 1% change in the price in Guiyang leads to a 0.43% growth in Chengdu. A uni-directional causal effect was suggested running from Chengdu to Guiyang. In the short run, the 1% change in the price in Chengdu leads to a 0.16% growth in Guiyang. Both in the long and the short run, home investors may not gain from a portfolio across these two cities. Evidence shows that policy shocks can change price trends.
Keywords: House price, long run, market, dynamic, Granger causality, ECM model.
Title: The effect of Geographical Space and Policy Shocks on Urban House Prices
Author: Gao- lu Zou
International Journal of Interdisciplinary Research and Innovations
ISSN 2348-1218 (print), ISSN 2348-1226 (online)
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