A research on the relation between real estate investment and economic growth in China

Through time-varying parameter introduction, this paper uses the Real Estate Investment (REI) and gross domestic production (GDP) data of China between 1991 and 2005 to build State Space Model, and calculates the time-varying elasticity of REI to GDP by employing Kalman Filter methods. The validity of the model is verified through Co-integration test. Through analysis of Granger Causality Tests,time-varying Parameter results and the pulling efficiency; the paper gets conclusions as follows: (1) The REI represents remarkable pulling effection to GDP; meanwhile, the GDP growth acts as a stimulus to the REI. (2) The REI shows time-varying elasticity to GDP and tendency of line growth in the sampling interval. It is faster between the period of 1991 and 1997, and relatively gentle between the period of 1998 and 2005. (3) The pulling efficency of REI gives positive play to the GDP with the reduction trend.