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The Demography-Credit-Property Price Model of Financial Crise
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TitleThe Demography-Credit-Property Price Model of Financial Crise  
AuthorZhang Xiaopu and Zhu Taihui  
OrganizationPolicy Research Department, China Banking Regulatory Commission; 
Key WordsFinancial Crisis; Property Bubble; Population Aging; Credit Expansion 
AbstractJapan's financial crisis in the 1990s and recent financial crisis in the United States demonstrated that the co-movement of population aging, credit expansion and property bubble tend to undermine the stability of the financial system, and even lead to financial crisis. Based on this stylized fact, this paper integrates the "credit-asset bubble model" proposed by Allen and Gale (2000) into the traditional “demography-asset bubble model" to build a Demography-Credit-Property Price Model (DCP model). In this model, the increasing of population, the declining of dependency ratio will promote faster economic growth and increase the resident’s demand for real estate, and finally promote the "basic price" of real estate to rise. When the "basic price" is rising, credit expansion will increase the investment demand for real estate, and promote the "bubble prices" of real estate to enlarge continually, eventually threatening the stability of financial system. The results of cross-countries empirical analysis and robustness tests are consistent with the results of theoretical model. 
Serial NumberWP577 
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