Empirical Research on Impacts of Real Estate Prices on Monetary Policy
|Keywords||Real Estate Prices Monetary Policy Vector Error Correction Model|
Since 1998, the real estate market has been developing rapidly and the real estate prices are soaring in China. Because the rapid development of the real estate market also contributes to the rapid economic growth, the real estate industry’s position in national economy is becoming increasingly important. But the resulting problems are causing widespread attention. From the world view, there are many cases of economic crisis caused by the burst of asset price bubble in history. Real estate bubble has also occurred in Hainan. And the recent financial crisis originated in the U.S. subprime mortgage crisis.Now the rising real estate prices in China have led to community concerns about asset price bubble. Monetary authorities have also taken a number of real estate control measures. But the effect is not good. On the one hand, the factors affecting the real estate prices are complex and monetary policy is difficult to play the role; the other hand, the fluctuation of real estate prices also affects the monetary policy through some mechanisms. This article will analyze the impact of real estate prices on monetary policy.In this paper, empirical analysis of the impact of real estate prices on the ultimate goals of monetary policy is made on the theories of the impact of asset price fluctuation on the macroeconomic and the currency demand and supply, through cointegration analysis and vector error correction model. And we can conclude that there is long-term interaction between output, inflation and real estate prices. Then this paper studies the impact of real estate prices on currency demand and supply. The result of the study is that the rising of real estate prices would increase the money supply. The money supply is no longer suitable for the intermediate target of monetary policy because of the money supply endogeneity. But the relationship between real estate prices and interest rates is not apparent. Finally, according to theory and empirical analysis, combined with current monetary policy of China, this paper analyzes the relationship between real estate prices and monetary policy, and puts forward some recommendations such as the establishment of a sound system of intermediate target of monetary policy and an early warning system.