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Seminar 1 - Understanding the Risk of China’s Local Government Debts and Its Linkage with Property Markets

When Oct 14, 2015
from 04:00 PM to 05:00 PM
Where Mill Lane Lecture Room 1
Contact Name
Contact Phone 337154
Attendees Dr Brent Ambrose, Penn State University
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Abstract: The intertwining of local Chinese housing markets with government fiscal policies coincides with the significant economic growth in China over the past 25 years.  This connection  is the direct result of China’s central government reforms to its fiscal system that have encouraged local governments to rely on land sales and development to fund required infrastructure projects.  Since China does not allow local governments to directly participate in the municipal bond market, these governments rely on a unique funding mechanism known as Local Government-Backed Investment Units (LGBIU). We study the linkage between the solvency of local government debt and local housing market risk. Our results indicate that areas with higher expected house price growth issue debt with lower risk premiums.  Furthermore, bonds issued by LGBIUs from areas that experience greater changes in housing prices have a corresponding decline in observed yield spreads. Thus, the results suggest that investors do price local housing risk into Chinese municipal bond risk premiums.


Speaker: Dr Brent Ambrose, Penn State University


Biography: Brent W. Ambrose is the Smeal Professor of Real Estate, Director of the Institute for Real Estate Studies, and Director of the Smeal College Ph.D. Program at the Smeal College of Business at the Pennsylvania State University.  Prior to joining Penn State University, Dr. Ambrose was the Director of the Center for Real Estate Studies and Professor of Finance at the University of Kentucky where he held the Kentucky Real Estate Professorship.  In addition, Dr. Ambrose was an Associate Professor at the University of Wisconsin-Milwaukee where he directed the UWM real estate program, and from 1997 to 1998 he was a Visiting Associate Professor and Research Fellow at the University of Pennsylvania Wharton School of Business. In 2010, Dr. Ambrose was President of the American Real Estate and Urban Economics Association (AREUEA) and served as the Executive Vice President of AREUEA from 1996 to 2003. In 2003, he was elected a Fellow of the Weimer School of Advanced Studies in Real Estate and Land Economics at the Homer Hoyt Advanced Studies Institute. In 2004, he was elected a Fellow of the Real Estate Research Institute and in 2006 he was appointed a Fellow of the FDIC Center for Financial Research.  Currently, Dr. Ambrose is the co-editor of Real Estate Economics (the journal of the American Real Estate and Urban Economics Association) and serves on the editorial boards of the Journal of Real Estate Finance and Economics, the Journal of Real Estate Research, and the International Real Estate Review, and is a member of the board of directors for the Real Estate Research Institute and the American Real Estate and Urban Economics Association. Dr. Ambrose specializes in real estate finance, corporate finance, and fixed income security analysis.  His research interests include issues related to Real Estate Investment Trusts (REITs), loss mitigation programs associated with mortgage default and foreclosure, Government Sponsored Enterprises (GSEs), fixed-income securities, and consumer credit contracts.  Dr. Ambrose has consulted with the U.S. Department of Housing and Urban Development and the Congressional Budget Office on several occasions regarding issues concerning FHA mortgage default and foreclosure, economically targeted assets, privatization of Fannie Mae and Freddie Mac, and the GSEs’ affordable housing goals.  Dr. Ambrose has published over 55 refereed articles in the fields of real estate and finance.  His work appears in the Review of Economics and Statistics,The Journal of Money Credit and Banking, The Journal of Financial Intermediation, Journal of Financial and Quantitative Analysis, Journal of Financial Services Research, The Journal of Real Estate Finance and Economics, Financial Management, Financial Analysts Journal, Real Estate Economics, Regional Science and Urban Economics,  Journal of Real Estate Research, Journal of Urban Economics, Journal of Housing Economics, Journal of Housing Research, The Wharton Real Estate Review, and Cityscape:  A Journal of Policy Development and Research.  In addition, Dr. Ambrose is co-editor of Household Credit Usage: Personal Debt and Mortgages, published by Palgrave/MacMillian.  Dr. Ambrose holds a Ph.D. and M.B.A. from the University of Georgia and a B.S. in Business from Wake Forest University.

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