Research On The Uncertainty And Housing Decision Of Urban Households In China

Uncertainty is the inherent environment in which the economic agents conduct activities and decisions.It has become an urgent issue for the development and sustainability of China's real estate market as well as the macro-economy to understand the behaviors of main economic participants under uncertainty based on the housing market.This thesis explores the connotation and source of uncertainty under China's transition economy.In addition,this thesis constructs a dynamic stochastic general equilibrium model and carries out several empirical estimations to investigate the macro effects and micro mechanisms of the impact of uncertainty on households' housing demand and mortgage demand in urban China.First,this thesis extracts the key economic and political influencing factors of households' housing decisions based on the literature review and the institutional background of China's social and economic reform.Four types of uncertainty,including income uncertainty,expenditure uncertainty,interest policy uncertainty and credit policy uncertainty,are highlighted as the core uncertainties affecting the housing decisions of households in urban China.Second,this thesis establishes a New Keynesian dynamic stochastic general equilibrium model with Chinese characteristics,and compares the simulated macro effects of exogenous uncertainty shocks in affecting Chinese households' housing demand and mortgage demand.Based on the impulse response function and the historical/forecast variance decomposition,it is found that the uncertainties of income and expenditure are important in affecting housing demand of households;and the impacts of uncertainties in income and credit policies are important that affects mortgage demand of households.It is further found that the macro effects of uncertainty shocks are likely to present frequency domain dependence,and function differently in real estate market with different level of frictions.Third,this thesis extends the theoretical framework by introducing the characteristics of human capital and social capital in China.The role of public expenditures on education and medical care,as well as the role of informal borrowing market,are further discussed from the heterogeneous perspectives.Regarding to housing demand,this thesis finds that,housing plays an important role in hedging uncertainties in China;compared with income uncertainty,households are more sensitive to uncertainty associated with education and health expenditures,and are likely to purchase more housing and to squeeze non-housing consumption when faced with higher expenditure uncertainty;the hedging role of housing increases with lower covariance between housing price and human capital price index;lower level of public expenditure on human capital strengthens the hedging role of housing against expenditure uncertainty.Regarding to mortgage demand,this thesis finds that,due to the low explicit cost,informal borrowing from relatives and friends has a crowd out effect on households' mortgage participation and decreases the loan to value ratio;for households with high financial literacy,income uncertainty reduces the crowd out effect of informal borrowing on households' mortgage demand;under credit policy uncertainty,the increase of cost of local social network increases the crowd out effect of informal borrowing on households' mortgage demand.Finally,the thesis puts efforts to propose effective and targeted policy implications in order to keep sustainable development of housing market,financial market and macro economy in China.