Research On The Effects Of Real Estate Market To The Macroeconomy In China

In this paper, we use real estate investment and house prices as the mainrepresentative variables of the real estate market to analyze the effects of real estatmarket on Macroeconomy. Firstly we conclude the historical interactive developmentbetween the real estate market and Macroeconomy, and then analyze themacroeconomic impacts of real estate investments and house prices respectively. Basedon those empirical results, we pointed that real estate investment isimportant for macro-economic fluctuation in the short-term, and it impacts theMacroeconomy mainly by influencing the non-real estate investment. But we can notconclude that the real estate investment is a drying force for economic growth inthe long term according to the Granger causes test. What is more, we find out that thesoaring prices of real estate assets turn to crowding-out rather thanincreasing consumer expending.Based on the above analysis, we bring in the monetary policy shock, andgive both empirical and theoretical analysis of the impacts of the real estate market onthe Macroeconomy under monetary policy shocks. And then following the financialaccelerator theory, we build a general equilibrium model with a financial acceleratormechanism to analyze the impacts of the real estate market on the Macroeconomyunder monetary policy shock theoretically. The simulation results indicate that thevolatility of the real estate market under monetary policy shock will exacerbate thevolatility of Macroeconomy.We give some policy recommendations following the above analysis: Firstly, wecan not have an overdependent attitude to the real estate industry though we do attachmuch importance to it, for we can not consider the real estate industry as the drivingforce of the macro-economic growth in the long term. Secondly, we should havea comprehensive assessment of impacts of the real estate market on Macroeconomy,for the real estate market can promote economic growth, but it could also turn tocrowding out other investments and household consumption in our country.Thirdly, weshould take full accounts of the role of real estate market in the monetary policytransmission mechanismin while implementing the monetary policy.When a monetary policy was applied, both the short-term and long-term effects should be considered,especially the latter.This paper mainly has the following the innovations: Firstly, following Gali's(1992) method, we adopt the structural vector auto-regressive model with bothshort-term and long-term constraint at the same time. Secondly, base on the empiricalanalysis we build a general equilibrium model with a financial accelerator mechanismand then give a theoretical analysis of the accelerated mechanism of real estate marketin Macroeconomy.Thirdly, not only we conclede the historical interactive developmentbetween the real estate market and Macroeconomy, but also we bring in the monetarypolicy shocks, and then analyze the effects of real estate on Macroeconomy in amonetary policy transmission mechanism framework.Fourthly, when analyzing theeffect of real estate investment in economic growth, we not noly analyse the wholeinteraction relationship between real estate investment and economic growth, but alsowe further point out its specific mechanism by decomposing the GDP.Last but not theleast innovation is to point out that the soaring house prices turn to crowding-out ratherthan increasing the consumer expending in our country.