Empirical Research on Housing Price Ripple Effect between China's Cities

Based on econometrics principles of the cointegration test and the error correction model, this research develops an innovative approach to quantitatively examine the ripple effect of house prices between Chinese big cities. Eight main capital cities' house price indexes (1998-2007) are selected and calculated using unit root test, Engle-Granger test and error correction model. The empirical results show that there is ripple effect of house price in nationwide eight cities. Simultaneously, the corresponding ripple effect pattern graph of nationwide eight cities is generated. It significantly shows that Shenzhen is original region of nationwide house price changing.