Land price and housing price, who decides whom: Based on panel data Granger causality analysis

Based on China 35 large and medium city´ panel data from 1998 to 2006, this paper employs panel data Granger causality test and error correction to explore the relationship between land price and housing price. The results are: (1) land price and housing price have mutual causal relationship and feedback mechanism; (2) land price and housing price have equilibrium relationship in a long term but are unbalanced in a short run with weak disequilibrium correct mechanism; (3) the effects of land price on housing price and the effects of housing price on land price have significant regional difference, which significant in east region but not significant in middle and west regions. The conclusions are: (1) macro control of land price and housing price should be implemented simultaneously; (2) measures of controlling land price and housing price is necessary and feasible to correct land price and housing price´s disequilibrium; (3) the government should make regional different land price and housing price macro control policy, the timing and strength of which in east region should be different to middle and west area in China.