Hypothesis 1: The Impact of Government Intervention in Causing Real Estate Market Dysfunction on Public Finances Independent Variable: The extent of government intervention in the real estate market Measurement: The intensity of government intervention can be quantified through various indicators: 1. Land supply policies: Government annual land allocation area and frequency. 2. Regulatory policy instances: The number of real estate market regulatory policies implemented by the government, including measures like purchase restrictions, credit policies, and tax incentives. 3. Price control measures: The strictness and duration of price control measures imposed by the government. Dependent Variable: The stability and health of public finances Measurement: Fiscal stability and health can be assessed using the following indicators: 1. Fiscal revenue volatility: The annual fluctuation rate of fiscal revenue. 2. Budget deficit size: The ratio of the annual budget deficit to GDP. 3. Debt levels: The ratio of total government debt to GDP. Interaction: The relationship between government intervention and market dysfunction Interaction Mechanism: An increase in expected government intervention may lead to market dysfunction, such as uneven resource allocation and price bubbles, thereby affecting the stability of public finances. This impact might be particularly pronounced during periods of market adjustment or downturns, as government intervention-induced price distortions could result in fiscal revenue instability and budgetary challenges. Conditional Variables: This interaction may vary depending on the economic development level and maturity of the real estate market in different regions. For instance, regions with more advanced economies and mature real estate markets might better withstand the market dysfunction effects of government intervention, while less developed regions could experience more severe impacts.
Hypothesis 2: The Impact of Reliance on Land and Real Estate Industries on Fiscal Pressure Dependent Variable: Fiscal pressure on local governments, including indicators like the debt-to-GDP ratio, budget deficits, credit ratings, and overall debt size. Independent Variable: Dependence on land sales and the real estate industry, quantified through metrics such as the amount of land sold and the percentage of total fiscal revenue derived from them. Interaction: The hypothesis suggests that heavy reliance on land sales and the real estate industry may initially alleviate fiscal pressure by providing direct income inflow. However, as the government excessively depends on these volatile income sources, the expected effect may diminish over time, potentially leading to increased long-term fiscal pressure. Interaction Condition: The interaction depends on the proportion of revenue derived from land sales and the real estate industry compared to total fiscal revenue. It is anticipated that there exists a critical threshold; exceeding this threshold could significantly increase fiscal pressure on local governments. Look at the RP and this 2 hypothesis, to write around 3 page to how to make a model analyze the situation and write down the experience. Besides you can apply some knowledge from slow-swan model and monetary policy model.
