Real Estate Price And Monetary Policy

Basing on the review and the summary of the related literature, this article is closely revolving the impact of the real estate price to the monetary policy system, as well as the center clue of the response of the monetary policy to the real estate price fluctuations ,and a series of important theories and the practice question is spreaded in theoretical analysis and the empirical study.Firstly, the author inspects the relations between the real estate price fluctuations and the macro economic fundamental plane. the thesis using data of real estate price and macroeconomic fundamentals in China'14 cites for 1998-2005,and empirically testing the explanatory power of fundamental on real estate price。The results are as follows:as far as the house price self-correlation considered,the explanatory power of macroeconomic fundamentals are reduced significantly,and compared with the macroeconomic fundamentals,the history information of house price can further more strongly explain the current house price;In addition,house price inflation has gradually deviated from macroeconomic fundamentals since 2001,especially this trend became even more aggravating since 2003,and the self-correlation of house price greatly enhanced。This also imply that the house price inflation contains more and more investment,even speculative composition。Then, the author starts to analyse the impact of the real estate price fluctuations on the monetary policy system. In the analysis of the real estate price and ultimate objective of the monetary policy, the author first inspected the impact of the real estate price fluctuations to the inflation and the output from the theory and the demonstration angles. With theory model,this thesis analyses the mechanism house prices affecting inflation and output,the conclusion is:house prices exert ascending pressure to inflation through aggregate demand,and the marginal impact of house price bring to saving is very important。Based on this,author tests the relationship among house prices,inflation and output with methods such as correlation analysis,co-integrate test。The conclusion of empirical test is :the effects house prices bring to inflation and output is very limited in short term;but in the long term,the effect is very significant,and there exist positive feedback mechanism among house prices,inflation and output。This means that such mechanism will bring about economic overheating and house price bubbles in a stable macro-economy environment。Next, the author inspected the impact of the real estate price fluctuations to the financial stability based on the the angle of view of the summarizes literature.The findings discovered that the large scale fluctuation of the property price and the credit fast large scale expansion unifies, which were the substantial clause of initiating the financial unstable; In terms of conditions that cause financial instability,facing with asset price volatility , good financial and economic environment,institutional environment and policy environment are very important protecting financial system stability。This has important enlightenment significance to the financial stability of our country.To the analysis of relations between the real estate price and the monetary policy intermediate target, the author first inspected impact of the the real estate price fluctuations to the currency supply and demand and the market rate. With phase graph,the author proves stable state of focus equilibrium existing in a dynamical system of two markets including house price,and the final effects house price exerting on market equilibrium interest rate depends on the comparison between marginal impact house price exerts on money supply with money demand。Theoretical analysis showed that with house price inflation,real estate market will act as a amplifier of the efficacy of expansionary monetary policy,and will play a attenuator role to the efficacy of tight monetary policy,which means house price inflation strengthening the endogenous creation capability of money supply and accordingly weakening the efficacy of tight monetary policy。Empirical research shows that the exogenous shocks of house price changes the stability of money demand,simultaneously strengthens endogeneity of money supply in China;House price has a reverse direction Granger effect on market interest rates in long-term,which shows that house price inflation becomes a important cause of fluidity surplus in China。Next, the author has carried on a theoretical analysis and empirical examination to the relationship between the real estate price and bank credit. The result discovered that the banking sector arises relations with the real estate market through holding the real estate property, making the property development construction loan, providing loan and providing other each kind of loan with the real estate property directly as the pawn. The real estate price fluctuations have the influence through the above four kind of channels on the bank credit supplies. this thesis empirically studies the effection which the real estate price exerts on bank lending with multi-variable Co-integration methodology。The result is as follows:real estate price and bank lending take on mutual cause and effect ;the direct effection real estate price has on bank loan is very limitied,it mainly influnences bank lending in a long run;and bank lending becomes to be the Granger cause of Short-term Fluctuation of real estate price。To the analysis of the relations between the real estate price and the monetary policy conduction , the author first inspected the rationale and the international experience of the real estate price conduction monetary policy. The analysis result indicated that the real estate price can play certain translocation regarding the monetary policy, but the concrete influence direction and effect is greatly enslaved to institutional factor. In impact of the monetary policy shocks to the real estate market supply and demand as well as in the house price influence process, the sensitivity of the economic subject to the change of the interest rate, the acquirability of the home mortgage loan , the rate structure and the deadline of the mortgage loan, as well as transaction cost and so on institutional factors would play an important function. The influence direction and the effect of the real estate price to consumption is very complex. It because that the opposite function of the real estate price flunction to the consumption lied on the proportion of the various types economic subject and the respective boundary expense tendency; Moreover, the consumption effect of the house price is influenced by the developed degree of a country mortgage market, the characteristic of the housing and mortgage market system and so on. Looked from the angle of the theoretical analysis, it is belived the direction of the influence of the house price is more consistent than the consumption regarding to the investment, namely the rising of the house price through a more higher effect of the Tobin Q and the credit channel effect ,which causes the growth of the investment. Certainly, the size of the influence of the house price to the investment lied on the importance of the real estate department in the national economy as a whole, the supply elasticity of the real estate as well as the status of the credit market and so on.Then, the author utilized the counter-fact simulation, the pulse response function, variance decomposes, the Co-integration analysis and the panel data model and so on ,the empirically examined the conduction of the real estate price flunction to the monetary policy .The empirical study about the shocks of our monetary policy to the real estate flunction discovered that, the shock of the constrictive monetary policy causes the real estate price to drop, but the expanding policy would cause the real estate price to rise. Moreover, the real estate price has a higher sensitive degree regarding the shock of currency credit monetary policy relative to the interest rate monetary policy. The thesis empirically examines the effect which house price fluctuation has on the resident consumption with the counter-factual simulation technique ,which discovered the rise of the house price brought a slight negative influence to the resident consumption.The result of Co-integration analysis and the counter-fact simulation also was consistent based on the nation aggregate data.However, being opposite with the above result, it actually discovered that the rise of the house price has had a weak positive influence on the consumption in the big or media-sized cities based on the panel data model with data of 14 urban cities. Generally speaking, the conduction efficiency of the real estate market fluctuation to the monetary policy,which through the consumption is also quite low.Through the empirical study on the investment effect that the real estate price flunction has , it discovered that the house price inflation plays an important part in the investment growth of the fixed assets and the real estate in short term , moreover, is an important explaination reason of investment growth. Therefore, in the conduction channel of the house price to the monetary policy in our country, the house price fluctuation then has the high conduction efficiency through the investment to the monetary policy.Finally, the author discussed the monetary policy response and the regulation to deal with the real estate price fluctuation. Firstly, the author reviewed the correlate theories and the empirical study based on the angle of view of the literature summarizes. The result discovered that the correct choice possibly is one kind of neutral monetary policy responded because the monetary policy authority makes reaction time to the real estate price fluctuation is still facing a series of uncertainty and risk: Namely a certain extent compatibility of the aggressive reaction and the afterward adaptive responding. The monetary policy and the financial supervision should be positively coordinated and the coordination, simultaneously, the monetary policy may regulate the supply and demand status of the real estate market by utilizing the real estate credit policy, thus it can effectively suppresses the house price oversized fluctuation.Afterward, the author reviewed the historical practice which the monetary policy regulated the house price, aim at how to carry on the response and the regulation in view of our country Central Bank to the house price fluctuation, the policy which the author proposed suggests to include: Firstly, the Central Bank should utilize the response way of the neutral monetary policy, during the pursuing the goal of the price and the output, under the controlled condition, make the positive nimble response to the house price fluctuation; Secondly, when carries on the regulation by using the monetary policy tool to the macro economic, the currency authority should consider fully the impact of the real estate market surges upward or the depression to the monetary policy effectivity, use actively the corresponding special operational policy measures to counteract the the negative effect which the real estate market produces to the monetary policy effectivity; Thirdly, when establishes the monetary policy, the monetary policy authority should consider fully the conduction function of the real estate market to monetary policy, avoiding or counteracting the negative influence which the rise of the house price produces to the investment. Fourthly, when carries on the regulation to the real estate price, the currency authority and the regulatory authority should positively coordinate, the monetary policy should utilize selective monetary policy tools such as the real estate credit policy and so on.