Do exchange rate arrangements and capital controls influence international capital flows and housing prices in Asia?

摘要

This paper investigates the influence of international capital flows on housing prices in eight Asian countries, including China. We focus on determining whether exchange rate arrangements and capital regulations influence capital inflows and housing prices. Our results show that an arrangement to restrain the fluctuation of the exchange rate and capital controls has the potential to raise housing prices in Asia. The strong prospect of the Chinese yuan's appreciation also pushed up housing prices in China. Another expected reason for the increase in capital inflows into Asian markets is the expansion of global liquidity. Such capital flows often have a sensitive reaction to market sentiment, and an increase in asset market volatility caused by the liquidity squeeze decreases Asian housing prices. These results suggest the need to review capital controls and future exchange rate system options for Asian countries.