A Empirical Study Of The Inhibtition Effect Of Public Expenditure Upon Indemnificatory Housing On Commercial Housing Price Within China

Abstract:The housing problem has plagued many countries during their accelerated developing stages. China has witnessed the quick rise in commercial housing price with its rapid economic growth and speeded urbanization. Currently, the ratio of house price to income fluctuates at all time high level. Governments takes public expenditure on indemnificatory housing as a direct accommodate measure to commercial housing price, which significantly decides the effectiveness of the adjustments. This kind of intervention would promote social benefit as well as provide a way to prevent ’house price bubble’ linked economic crisis.Based on the evolution of indemnificatory housing policy in China and foreign experience, this paper proposed a hypothesis of how public expenditure on indemnificatory housing could curb commercial housing price. Subsequently this paper employed Panel Vector Autoregressive model (PVAR) to do the empirical study. The sample consists of2008to2012annual data of public expenditure on indemnificatory housing and commercial housing price from29provinces and municipalities. Result shows that third order lagged public expenditure on indemnificatory housing significantly curbed commercial housing price. And the following impulse response analysis shows that commercial housing price responded negatively, in all10lag phase, to public expenditure on indemnificatory housing, and the end of fifth year appeared the maximum value. In other words, public expenditure on indemnificatory housing would continuously curb the commercial housing price. Apparently, the empirical study justified the hypothesis of how public expenditure on indemnificatory housing could curb commercial housing price. Finally, based on the hypothesis, this paper provided advices for governments of improving public expenditure on indemnificatory housing in perspective of structural optimization.