Chi-Wei Su

China's housing bubble burst?

In this paper, we developed the recursive unit root tests to identify the beginning and end of potential speculative bubbles in the Chinese housing price cycles during 2006–2013 for the 70 major cities of China. The method is best suited for a practical implementation with a time series and delivers a consistent date‐stamping strategy for the origination and termination of multiple bubbles. Simulations demonstrate that the test significantly improves discriminatory power and leads to distinct power gains when multiple bubbles occur. Overall, the results indicate that the speculative housing price bubbles in China are not bursting, and they indicate that the stationarity of the housing price level varies across the different city sizes. Between the cities, approximately one‐fourth of the bubbles have burst up to December 2013, while the first‐tier city bubble may not burst due to the urbanization process.

Is economic growth improving urbanisation? A cross-regional study of China

This study applies a bootstrap panel Granger causality test to determine the relationship between urbanisation and economic growth for China. We find that the patterns of interaction between urbanisation and economic growth vary across different regions. The empirical results show that in urbanisation of the northern coastal region and most of the inland region Granger causes economic growth, whereas economic growth does not have a significant effect on urbanisation, except in the southern coastal region and the inland region. One-fourth of China’s provinces, primarily in the southern coastal region, do not show a Granger causality relationship between urbanisation and economic growth. This finding indicates that urbanisation has promoted economic growth by expanding demand and that economic growth’s effect on urbanisation is restricted by administrative intervention rather than market mechanisms. Thus, the findings for three-fourths of the provinces in China conform to the urbanised economy theory. These results may help regional governments undergoing urbanisation to create fair economic growth policies.

Are there bubbles in Chinese RMB–dollar exchange rate? Evidence from generalized sup ADF tests

This article uses recently developed generalized sup ADF (GSADF) unit root tests into the analysis of nominal RMB–dollar exchange rates bubbles. Based on the results from the GSADF tests, we find strong evidence of explosive behaviour in the nominal exchange rate and investigate two bubbles there. The first bubble is during 2005–2006 which is determined neither by the relative prices of traded goods nor the relative price of nontraded goods. The second bubble busts in 2008 during subprime crisis period, and which is determined by the relative prices of traded goods but not the relative price of nontraded goods. There is no bubble before 2005 as the exchange rate is under fixed regime. As for this result, some expansionary monetary and fiscal policies are required in China since these are the most efficient and effective under a bubble burst scenario.

Convergence of China’s Urbanization

AbstractIn this study, a flexible Fourier stationary test is applied to evaluate the convergence of China’s urbanization. Whether regional urbanization is suitable for each region varies, but it is important for China’s harmonious development of regional economies. Findings are provided by using a unit root test, and the findings are different from those of previous tests of urbanization level convergence. Results show that the stationary test results for urbanization level vary across different regions; urbanization levels are converged in most provinces in China except for Guangdong, Hunan, and Jiangxi, which have their own economic development rules owing to the open economy and their urbanization processes. Urbanization has converged in China, and the process appears to have been largely stable, which means that government policies are coordinated in most regions. That is, most regional urbanizations are in accordance with each other and with the market, and government authorities are ensuring balance...

Is Income Converging in China

This study adopts a flexible Fourier unit‐root test proposed by Enders and Lee (2012) to revisit the tendency towards convergence in real per capita income among provinces after economic reform in China. When a data‐generating process is non‐linear, a Fourier series not only allows for the possibility of an unknown number of structural breaks with unknown forms but also allows for the use of a low‐frequency component to capture multiple changes. Contrary to what the linear statistics suggest, our results from a flexible unit‐root test indicate that Chinas eastern and western regions are converging to their own specific steady states.

Is urbanization improving real estate investment? A cross-regional study of China

This paper applies bootstrap panel Granger causality to test the relationship between urbanization and real estate investment from 1990 to 2014 for 29 provinces in China. We argue that the patterns of interaction between urbanization and investment in real estate vary across regions. The results show that urbanization does Granger†cause investment in real estate, primarily in the central and northeastern regions of China, while urbanization does not Granger†cause investment in real estate in the eastern and western regions, except for four provinces. Most regions do not have a Granger†causality relationship from real estate investment to urbanization; the exceptions are Henan and Hei Longjiang provinces. Our results only support one theory on the relationship between urbanization and the real estate market for one†third of the provinces. Thus, urbanization can improve real estate investment by increasing the demand for housing as a result of population agglomeration, but urbanization does not depend on real estate investment in China.

Investment coordinates in the context of housing and stock markets nexus

ABSTRACT This study examines the causal relationship between Chinese housing market (HM) and stock market (SM), using the bootstrap Granger full-sample causality test and subsample rolling-window estimation test. The results show that stock price (SP) has both positive and negative impacts on housing price (HP) in several sub-periods, and HP has the same effects on SP. The substitution effect drives their adverse consequences. Meanwhile, the positive effect indicates that SP has a wealth effect on HP, and HP has a credit-price effect on SP. Results provide information to Chinese financial institutions and individual investors for constructing investment portfolios within these asset markets.

Nonlinear Taylor rules in Central Eastern European countries

This study applies sequential panel selection method (SPSM), proposed by Chortareas and Kapetanios (2009), to investigate to test the validity of Taylor rules to assess the nonstationary properties of the convergence of the real exchange rates for 10 Central Eastern European countries. The SPSM can be used to decompose a panel of real exchange rate series into two groups: a group of stationary series and a group of nonstationary series. We identify the stationary processes in the panel and demonstrate that Taylor rules holds for 7 of the 10 countries studied. These results imply that the choices and effectiveness of the monetary policies in Central Eastern European economies are highly influenced by external factors originating from the United States. Additionally, our findings highlight that their real exchange rate convergence is a mean reversion toward equilibrium values of Taylor rules in a nonlinear manner.

Weibo sentiments and stock return: A time-frequency view

This study provides new insights into the relationships between social media sentiments and the stock market in China. Based on machine learning, we classify microblogs posted on Sina Weibo, a Twitter’s variant in China into five detailed sentiments of anger, disgust, fear, joy, and sadness. Using wavelet analysis, we find close positive linkages between sentiments and the stock return, which have both frequency and time-varying features. Five detailed sentiments are positively related to the stock return for certain periods, particularly since October 2014 at medium to high frequencies of less than ten trading days, when the stock return is undergoing significant fluctuations. Sadness appears to have a closer relationship with the stock return than the other four sentiments. As to the lead-lag relationships, the stock return causes Weibo sentiments rather than reverse for most of the periods with significant linkages. Compared with polarity sentiments (negative vs. positive), detailed sentiments provide more information regarding relationships between Weibo sentiments and the stock market. The stock market exerts positive effects on bullishness and agreement of microblogs. Meanwhile, agreement leads the stock return in-phase at the frequency of approximately 40 trading days, indicating that less disagreement improves certainty about the stock market.

Is exchange rate stability beneficial for stabilizing consumer prices in China

This study examines the relationship between real effective exchange rates (REERs) and the consumer price index (CPI) in China, utilizing a bootstrap Granger full-sample causality test and a sub-sample rolling-window estimation. Considering structural changes, we assess the stability of the parameters and find that both the short-run and long-run relationships between the two estimated variables are unstable. This result suggests that full-sample causality tests cannot be relied upon. We instead employ a time-varying (bootstrap) rolling-window approach to revisit the dynamic causal relationship, and we find that the CPI is affected by the REER for several sub-samples due to the role of exchange rate pass-through (ERPT) under the managed floating exchange rate regime in China. These findings provide further proof of the impact of stable exchange rates on the maintenance of relatively steady price levels especially during the economic crisis and economic reform in China. The policy implication of these findings is that maintaining exchange rate stability is beneficial for controlling inflation during the economic crisis and economic reform.