This paper investigates whether housing collateral is important to the business cycle in China. We develop two models …, one without housing collateral as benchmark and one variant allowing for it. Indirect Inference procedure tests these two … models' compatibility with the data. We find that the benchmark model passes the test, while the collateral model is strongly …

borrowers and supply less credit to unproductive firms when collateral values rise. My results provide direct evidence that …

model in terms of overall goodness of fit. In particular, the presence of housing collateral generates a positive … correlation between consumption and house prices. Finally we find that housing collateral induced spillovers account for a large …