Does Higher Mortgage Leverage Always Boost Housing Price?:Evidence from the Threshold Model of Provincial Panel Data
WEI Wei, CHEN Jie
Bussiness School,East China University of Political Science and Law; Sohool of Public Economics and Administration,Shanghai University of Finance and Economics
Abstract:
Does higher mortgage leverage always pushes higher housing price? The existing literature does not give a conclusive answer to this question. This paper extends the optimal inter-temporal consumption theory model to allow mortgage leverage having nonlinear threshold effect on housing price. Applying the panel threshold model on Chinese provincial-level panel data over the period 2006-2015, our empirical research shows the response of housing price to financial leverage has double threshold effect but there is significant regional heterogeneity of this effect. Our research findings have important policy implications for real estate market regulation.
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