{"title":"The Study on the Stationarity of Housing Price-to-Rent and Housing Price-to-Income Ratios in China","authors":"Wen-Chi Liu","volume":86,"journal":"International Journal of Economics and Management Engineering","pagesStart":367,"pagesEnd":372,"ISSN":"1307-6892","URL":"https:\/\/publications.waset.org\/pdf\/9997322","abstract":"<p>This paper aims to examine whether a bubble is present in the housing market of China. Thus, we use the housing&nbsp; price-to-income ratios and housing price-to-rent ratios of 35 cities from 1998 to 2010. The methods of the panel KSS unit root test with a&nbsp; Fourier function and the SPSM process are likewise used. The panel&nbsp; KSS unit root test with a Fourier function considers the problem of&nbsp; non-linearity and structural changes, and the SPSM process can avoid&nbsp; the stationary time series from dominating the result-generated bias.&nbsp; Through a rigorous empirical study, we determine that the housing&nbsp; price-to-income ratios are stationary in 34 of the 35 cities in China.&nbsp; Only Xining is non-stationary. The housing price-to-rent ratios are&nbsp; stationary in 32 of the 35 cities in China. Chengdu, Fuzhou, and&nbsp; Zhengzhou are non-stationary. Overall, the housing bubbles are not a&nbsp; serious problem in China at the time.<\/p>\r\n\r\n<p>&nbsp;<\/p>\r\n","references":"[1]\tHui, E. C. M. and S. Yue (2006), \"Housing price bubbles in Hong Kong, Beijing and Shanghai: A comparative study,\u201d Journal of Real Estate Finance and Economics, 33(4): 299-327.\r\n[2]\tXiao, Q. and G. K. R. Tan (2007), \"Signal extraction with kalman filter: A study of the Hong Kong property price bubbles.\u201d Urban Studies, 44(4): 865-888.\r\n[3]\tClark, S. P. and T. D. Coggin (2010), \"Was there a U.S. house price bubble? An econometric analysis using National and Regional panel data,\u201d Quarterly Review of Economics and Finance.\r\n[4]\tZaemah, Z., N. M. Jali, C. Gan, and B. Ward (2012), \"Revitalizing the issues, theories and concept of house price bubbles,\u201d 3rd International Conference On Business And Economic Rearch (3rd ICBER 2012) Proceeding.\r\n[5]\tHimmelberg, C., C. Mayer, and T. Sinai (2005), \"Assessing high house prices: Bubbles, fundamentals and misperceptions,\u201d Journal of Economic Perspective, 19(4): 67-92.\r\n[6]\tBaker, D. (2007), \"2007 Housing bubble update: 10 economic indicators to watch,\u201d Issue Brief, Center for Economic and Policy Research.\r\n[7]\tMikhed V. and P. Zem\u010d\u00edk (2009), \"Testing for bubbles in housing markets: A panel data approach,\u201d The Journal of Real Estate Finance and Economics, 38(4): 366-386.\r\n[8]\tCase, K. E. and R. J. Shiller (2003), \"Is there a bubble in the housing market?\u201d Brookings Papers on. Economic Activity 2: 299-362.\r\n[9]\tBlack, A., P. Fraser, and M. Hoesli (2006), \"House prices, fundamentals and bubbles. Journal of Business Finance & Accounting,\u201d 33(9): 1535-1555.\r\n[10]\tUcar, N. and T. Omay (2009), \"Testing for unit root in nonlinear heterogeneous panels,\u201d Economics Letter, 104: 5-8.\r\n[11]\tKapetanios, G., Y. Shin, and A. Snell (2003), \"Testing for a unit root in the nonlinear STAR framework,\u201d Journal of Econometrics, 112: 359-379.\r\n[12]\tIm, K. S., M. H. Pesaran, and Y. Shin (2003), \"Testing for unit roots in heterogeneous panels,\u201d Journal of Econometrics, 115: 53-74.\r\n[13]\tPerron, P. (1989), \"The great crash, the oil price shock and the unit root hypothesis,\u201d Econometrica, 57(6): 1361\u20131401.\r\n[14]\tChortareas, G. and G. Kapetanios (2009), \"Getting PPP right: Identifying mean-reverting real exchange rates in panels,\u201d Journal of Banking and Finance, 33: 390-404.\r\n[15]\tEnders, W. and J. Lee (2011), \"A unit root test using a Fourier series to approximate smooth breaks, Oxford Bulletin of economics and statistics,\u201d 0305-9049 doi: 10.1111\/j.1468-0084.2011.00662.x.\r\n[16]\tGallant, R. (1981), \"On the basis in flexible functional form and an essentially unbiased form: The flexible Fourier form,\u201d Journal of Econometrics, 15: 211-353.\r\n[17]\tBecker, R., W. Enders, and J. Lee (2004), \"A general test for time dependence in parameters,\u201d Journal of Applied Econometrics, 19: 899-906.\r\n[18]\tPascalau, R. (2010), \"Unit root tests with smooth breaks: An application to the Nelson-Plosser data set,\u201d Applied Economics Letters, 17: 565-570.\r\n","publisher":"World Academy of Science, Engineering and Technology","index":"Open Science Index 86, 2014"}