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Research on Dynamic Effect of Monetary Policy to Real Estate Price in China

Author: ZhangYaoLu
Tutor: TaoMeiZhen
School: Nanjing University of Finance and Economics
Course: Finance
Keywords: Monetary policy Real estate price Dynamic effect VAR model
CLC: F293.3;F224
Type: Master's thesis
Year: 2011
Downloads: 212
Quote: 0
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Abstract


In recent years, the real estate industry is becoming our economic pillar industry. The healthy development of real estate industry contributes to improving the living conditions of local residents, increasing the national revenue, raising the speed of speed of economic development. The real estate is investment goods and consumer goods, which leads to abnormal volatility of real estate prices. It is necessary to strengthen management and regulation of real estate prices. Monetary policy is an important tool for regulating the real estate market. The change of interest rates and monetary supply has a long dynamic influence on real estate prices. Therefore, the research on effect of China’s monetary policy to real estate price has important theoretical and practical significance.This paper will analyze the effect of monetary policy to real estate price from the angles of the money supply and interest rates. In the theoretical research part, the author introduces the regulation tools of real estate prices combined the change of monetary policy in China. Then we discuss the mechanism of the effect of monetary policy to real estate price, including interest rate channel, credit channel and asset price channel.In the empirical research part, this paper analyzes the effect of monetary policy to real estate price from two perspectives. In first part, we research the relationship of interest rate, money supply and real estate prices using ADF test, Ciontegration test and Granger causality tests. In second part, we establish the VAR model including interest rate, the money supply and real estate prices, and then analyze the dynamic effect of China’s monetary policy to real estate price through the impulse response function and variance decomposition.Through theoretical analysis and empirical research, the main conclusions of this paper are following: interest rate is negatively correlated with real estate price; the money supply is positively correlated with real estate price; real estate price is more sensitive to the money supply. The rising of interest rate will first cause real estate price to rise, then cause real estate price to fall. Interest rate policy has gradual decrease influence on real estate price in the long term. Increasing the money supply will cause real estate price to rise, then the influence become weak. A change in the money supply has gradual decrease influence on real estate price in the long term.Finally, based on the conclusions, we put forward the policy suggestions: firstly, improving monetary policy prospective and shortening internal delay of monetary policy; secondly, formulating rational interest rate policy and promoting gradually the interest rate marketization; thirdly, controlling reasonably the increment speed of the money supply and adjusting the housing credit structure; finally, strengthening the organic cooperation of monetary policy and other policies.

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CLC: > Economic > Economic planning and management > Economic calculation, economic and mathematical methods > Economic and mathematical methods
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