Local Fiscal Expenditure and House Price: Theory and Evidence
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| Title | Local Fiscal Expenditure and House Price: Theory and Evidence |
| Authors | |
| Abstract | By analyzing a modified version of static Mundell-Fleming model, I derive that local fiscal expenditure positively affects house price. Then I test the hypothesis with panel data of China seventy upper middle cities from 1998 to 2009 and obtain the supportive evidence for nexus between local fiscal expenditure and house price; 1% change in local fiscal expenditure could result in a 3% change in house price, on the other hand, I ensure the causality between the two with instrumental variable estimation, and discover that when endogenizing the local fiscal expenditure, the magnitude could double. Therefore, local governments could take their fiscal expenditure as an instrument in controlling the house price. |
| Publisher | World Science Publisher |
| Date | 2012-02-27 |
| Source | 2167-6348 |
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