Does housing boom lead to credit boom or is it the other way around? The case of China

This study examines the lead-lag relations between the observed correlations of credit and housing price growths during three different sample periods, namely, whole, twin boom, and non-twin boom. We used data from 27 provinces and four municipalities in China. We adopted the panel error correction model to estimate the lead-and-lag relation because the two variables are panel-cointegrated. While we find that bi-directional lead-and-lag relation exists in both markets, the leading effect of housing prices on credit appears to be stronger than the effect of credit on property prices.