Ripple Effect of Housing Prices among Chinese Deputy Provincial Cities Based on an Alternative Approach

Abstract

This paper applies a two-stage procedure of non-parametric testing and business cycle dating techniques to examine the ripple effect of housing prices among Chinese cities since 2006. Empirical analysis indicates that housing prices fluctuations among nineteen Chinese cities do have ripple effect. We divide the cities into three layers: Shenzhen and Guangzhou are in the first layer; Beijing, Shanghai, Hangzhou, Nanjing, Xiamen are in the second; and other cities are in the third one. The direction is from the first layer to the third layer and the effect gets weaker and weaker. Empirical results show that: (1) Shenzhen and Guangzhou are the main regulatory targets; (2) Cities in the second layer should be paid attention to, especially unexpected fluctuations of housing prices of cities in the third layer ought to be avoided.