| Abstract | The past literature seldom discusses the city-level housing price spillover and the city-level heterogeneity response of housing price to interest rate shock. This paper adopts the recently developed GVAR model to empirically study not only the spillovers of housing price and real income per capita among China’s 35 major cities but also the impact of interest rate shock to the housing price development among these cities. The empirical results show that, the first-tier cities, such as Beijing and Shanghai, have comparatively large spillovers of housing price, while the spillovers in central and western cities are not obvious. The housing price of first-tier and eastern cities are not only affected by the real income per capita of these cities themselves but also affected by that of other cities in a large extent, while the housing price of central and western cities are mainly affected by the real income per capita of these cities themselves. The real interest rate changes have weak influence on the housing price of central and western cities, but large influence on that of first-tier cities and eastern cities. The empirical results have definite policy implications. In order to stabilize the housing price, Chinese government should promote the regional equalization of public goods, intensify housing purchase restriction, and implement sub-regional real estate policy. Adjusting interest rate policy is also a practicable policy choice for stabilizing housing price. |