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Empirical Economics

, Volume 56, Issue 4, pp 1413–1432 | Cite as

Detecting bubbles in China’s regional housing markets

  • Wei-Fong PanEmail author
Article

Abstract

This study employs the supremum augmented Dicker–Fuller (SADF) and generalized supremum ADF (GSADF) tests to examine the Chinese housing market for the presence of bubbles from 2005 to 2016. We first employed a conventional right-tailed unit root test, and the results clearly suggest that housing prices showed no explosive behaviour in most cities. We further used SADF and GSADF, and the results suggest that most major cities in China experienced bubbles, with the longest bubble period from 2015 to the present, which is still ongoing. The SADF and GSADF results are robust after considering the effects of interest and mortgage rates. Moreover, the northern and southern regions experienced the largest number of bubbles, with over 1.1 bubbles for each city, while the western region experienced the fewest bubbles over the last decade. The western region had bubbles with the shortest durations, around 4 months, than other regions, where the average duration was at least 5 months. This study provides potentially valuable insights into the Chinese housing market and offers important policy implications.

Keywords

Real estate Rational bubbles Housing market Recursive unit root 

JEL Classification

C32 G01 R30 

Notes

Acknowledgements

The author is grateful to the coordinating editor, Robert M. Kunst, and to the two anonymous referees for their helpful comments and insights. Remaining errors, however, are my own.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2017

Authors and Affiliations

  1. 1.Research InstituteFirst Capital Securities Co., Ltd.ShenzhenChina

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