Kun Duan , Liya Zhang , Shuyun Chen , Andrew Urquhart
{"title":"Heterogeneous housing bubbles and monetary policy","authors":"Kun Duan , Liya Zhang , Shuyun Chen , Andrew Urquhart","doi":"10.1016/j.irfa.2025.104079","DOIUrl":null,"url":null,"abstract":"<div><div>This paper isolates rational and naive bubbles within a unified framework allowing bounded rationality, and studies how monetary policy surprises affect these bubbles’ characteristics differently. Employing a comprehensive dataset in urban China, our results demonstrate that both the magnitude and type of housing bubbles evolve across locations over time. Tightening monetary policy is found to exert a containing role in rational bubble dynamics but its role in naive bubbles is less significant. Our results confirm the effectiveness of contractionary monetary policy and home purchase restrictions in combating China’s housing bubbles thanks to the nationwide dominance of a rational bubble type.</div></div>","PeriodicalId":48226,"journal":{"name":"International Review of Financial Analysis","volume":"103 ","pages":"Article 104079"},"PeriodicalIF":9.8000,"publicationDate":"2025-03-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Review of Financial Analysis","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1057521925001668","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This paper isolates rational and naive bubbles within a unified framework allowing bounded rationality, and studies how monetary policy surprises affect these bubbles’ characteristics differently. Employing a comprehensive dataset in urban China, our results demonstrate that both the magnitude and type of housing bubbles evolve across locations over time. Tightening monetary policy is found to exert a containing role in rational bubble dynamics but its role in naive bubbles is less significant. Our results confirm the effectiveness of contractionary monetary policy and home purchase restrictions in combating China’s housing bubbles thanks to the nationwide dominance of a rational bubble type.
期刊介绍：
The International Review of Financial Analysis (IRFA) is an impartial refereed journal designed to serve as a platform for high-quality financial research. It welcomes a diverse range of financial research topics and maintains an unbiased selection process. While not limited to U.S.-centric subjects, IRFA, as its title suggests, is open to valuable research contributions from around the world.
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