Do Capital Flows Matter to Stock and House Prices? Evidence from China |
| |
| Authors: | Ling Feng Chun Wang |
| |
| Institution: | 1. School of Finance, and Shanghai Key Laboratory of Financial Information Technology, Shanghai University of Finance and Economics, Shanghai, China;2. Department of Economics, Brooklyn College, The Graduate Center, City University of New York, New York, New York, USA |
| |
| Abstract: | This article analyzes the impacts of foreign direct investment (FDI) and short-term capital flows, otherwise known as hot money, on stock and house prices in China. Empirical results, estimated using the local projections approach, reveal that a positive hot money net inflow shock significantly increases stock and house prices and the impacts persist for up to 1–2 months, while a positive FDI net inflow shock contributes significantly to lagged house price appreciation but has no effect on stock prices. This study also identifies negative pass-through effects of FDI net inflows on hot money net inflows and positive pass-through effects of stock prices on house prices. |
| |
| Keywords: | asset prices capital flows China local projections |
|
|
