The Dynamic Relationship among Bank Credit, House Prices and Carbon Dioxide Emissions in China

Abstract

This paper explores the dynamic relationship among bank credit, house prices and carbon dioxide emissions in China by systematically analyzing related data from January 2000 to December 2019 with the help of the time-varying parameter vector autoregression with stochastic volatility (TVP-SV-VAR) model and the Bayesian DCC-GARCH model. Empirical results show the expansion of bank credit significantly drives up house prices and increases carbon dioxide emissions in mosttimes. The rise in house prices inhibits the expansion of bank credit but increases carbon dioxide emissions and aggravates environment pollution, and that the increase in carbon dioxide is helpful to stimulate bank credit expansion and house price rise. In addition, bank credit and house prices are most relevant, followed by bank credit and carbon dioxide emissions, then by house prices and carbon dioxide emissions. Therefore, we believe that in order to stabilize skyrocketing house prices, restrain carbon dioxide emissions, and secure a stable and healthy macro-economy, the government should strengthen management of bank credit, and effectively control its total volume.

Identifying the spatial heterogeneity of housing financialization in China: Insights from a multiscale geographically weighted regression

“…On the one hand, credit expansion is the main driver of house price appreciation [ 30 ], i.e., lending drives up housing prices; real estate requires a large amount of capital investment and relies on credit funding, and when large amounts of credit funds flow into real estate, housing prices rise. On the other hand, urban housing is gradually becoming a financial product and available collateral, real estate prices affect the availability of loans through wealth effects, and the belief in the high-profit margins offered by real estate has spawned lending behavior and more aggressive financial institution lending programs, facilitating the investment of more credit funds into the real estate market [ [80] , [81] , [82] ].…”