Do Capital Flows Matter to Stock and House Prices? Evidence from China. Issue 10 (3rd October 2017)

• Record Type: Journal Article
• Authors: Feng, Ling; Lin, Ching-Yi; Wang, Chun
• Is Part Of: Emerging markets finance & trade. Volume 53:Issue 10(2017)
• Page Start: 2215
• Page End: 2232
• Publication Date: 2017-10-03
• Subjects: asset prices -- capital flows -- China -- local projections; Balkan Peninsula -- Commerce -- Periodicals; Balkan Peninsula -- Foreign economic relations -- Periodicals; Europe, Central -- Commerce -- Periodicals; Europe, Central -- Foreign economic relations -- Periodicals; Europe, Eastern -- Commerce -- Periodicals; Europe, Eastern -- Foreign economic relations -- Periodicals; Turkey -- Commerce -- Periodicals; Turkey -- Foreign economic relations -- Periodicals; Asia -- Commerce -- Periodicals; Asia -- Foreign economic relations -- Periodicals; Eurasia -- Commerce -- Periodicals; Eurasia -- Foreign economic relations -- Periodicals; 382.05
• DOI: 10.1080/1540496X.2016.1180283
• Languages: English
• ISSNs: 1540-496X

Abstract

ABSTRACT: This article analyzes the impacts of foreign direct investment (FDI) and short-term capital flows, otherwise known as hot money, on stock and house prices in China. Empirical results, estimated using the local projections approach, reveal that a positive hot money net inflow shock significantly increases stock and house prices and the impacts persist for up to 1–2 months, while a positive FDI net inflow shock contributes significantly to lagged house price appreciation but has no effect on stock prices. This study also identifies negative pass-through effects of FDI net inflows on hot money net inflows and positive pass-through effects of stock prices on house prices.