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Analysis Of The Impact Of Macro Policies To Real Estate Market Base On Expectation Theory

Posted on:2013-05-27Degree:DoctorType:Dissertation
Country:ChinaCandidate:Z Y XueFull Text:PDF
GTID:1229330377451707Subject:Business Administration
Abstract/Summary:PDF Full Text Request
Real estate industry is an important pillar industry of our national economy, which relates to the people’s livelihood closely. In recent years, the development of real estate market has been perplexing by the issue of "over-rising housing prices". Since the year of2003, Chinese government has promulgated a series of policies and measures as to bring housing prices back to normal. However, most of these policies only took effect within a certain period. In some other periods, macro control’s result differed greatly from policy target, which made the drop of housing price itself or housing price rising rate to be temporary and minor. These policies cannot meet government’s expectations and the issue of over priced housing was not completely solved. As real estate market macro control policy is discretion-based, in some cases it even exaggerated price fluctuations and rises. Multiple factors produce this result. Based on expectation theory, this paper analyses the phenomenon above and its underlying reasons, and then makes meaningful suggestions on domestic real estate market macro control policies.Key viewpoints in this paper:In economics, expectation is to forecast economy variable’s future that relates to current decision-making. Because almost all economy decision-makings now actually relate to exchange for future uncertain paybacks with immediate actions, expectation plays a vital role in decision makings. It is the real estate market’s monopolized, social and capital characteristic that makes expectation a vital role in policy making. Expectation of behavior parties especially relates to real estate market functioning. In our current economy system, land belongs to the nation which monopolizes class one land market, and government examines and approves construction land, construction purpose, construction plan and construction implementation, and so on. Decision making of both property sellers and buyers is definitively affected by government macro finance and taxation policy. Consequently, government policies play a leading role in shaping housing price expectation. It is the inconformity between public expectation and guidance expectation of government policies that results in real estate market deviating from rationality and the fact of "housing prices always rise never drop, the more macro control the higher housing prices". Meanwhile, in the analysis based on rational expectation, it is concluded that: rational expectation hypothesis cannot be realized in reality, information cannot be of conformity among those expectation parties, public reachable information is incomplete, public expectation formation process is not completely rational but limitedly rational. Therefore, simply implementing a rational expectation model cannot solve the validity problem of our real estate market macro control policies. This paper develops rational expectation theory:complete rationality is expanded into limited rationality, i.e., quasi rational expectation model, and then implements this model to analyse the validity of macro control policies.This paper’s research methods are as follows:First, a summary of expectation theory, as well as both domestic and overseas research on how it affects macro economy and real estate market, is outlined, on this basis, this paper discusses public expectation’s important role in housing prices forming via a depth analysis of American subprime crisis process and causes, based on conduction mechanism of expectation theory. It is also found that the key factor which affecting public expectation is the government’s economy policy.Second, the discussion is turned to domestic real estate market. It is found that Chinese housing price is severely affected by Chinese government policies through observing how Chinese real estate market has been developing in the last6years. Besides, different from America, forming process of Chinese housing price expectation is more directly intervened in by government’s real estate macro control policies. This paper classifies real estate macro control policies into stages with assistance of housing price data of Beijing. Based on this, in each stage, expectation guidance, conduction process and expected result of government’s macro control policies are analysed in-depth, from which the reason is found for the validity of Chinese real estate macro control policy.Third, this paper develops a quasi rational expectation model for real estate market by improving rational expectation model. Based on this, via positive analysis approaches, this paper conducts positive analysis on validity of representative real estate macro control policy, and further proves the above analysis conclusions.This paper has the following conclusions:First, the fact that public expectation affects our domestic housing price’s fluctuation is validated. A large amount of research shows that housing price is affected not only by economy fundamentals such as liquidity or citizen income, but also by expectation which is even a key factor. Due to information incompleteness and asymmetry, public expectation is not stable after policy being in practice, and it is not necessarily developing as the government wishes. Public expectation normally tends to exaggerate housing price fluctuating or consolidate certain changing trends. Especially, in recent years, public expectation has become the most vital factor in affecting domestic housing prices.Second, a quasi rational expectation model is proposed to analyze the result of real estate macro control policy. Through fuzzed rational expectation model, a quasi rational expectation model is put forward, which better solves the problem of information asymmetry and incompleteness, and makes analysis results closer to reality. Based on this, we can finally analyze whether macro control policy is valid or not, in a more accurate and reliable way.Third, the conduction mechanism among macro control policy, public expectation and housing price, especially the validity of policies is analyzed in-depth. It is also found that real estate macro control policy does not always take effect, that is, the validity of policy is affected by the result of how it shapes the public expectation. Only if it can form a common expectation among all parties, the policy can really work. However, public common expectation depends greatly on government’s macro control policy to be clear, persistent and credible. This is the only way to make public establish confidence on policy, willing to accept expectation guidance of policy, forming a realistic expectation which finally reflects in housing price fluctuating.In summary, innovation points in this paper are:First, the limitation of rational expectation theory impedes its capability on analyzing our domestic housing price and macro control policies. This paper improves rational expectation model via a fuzzy method, and develop a quasi rational expectation model for housing price, which is a further supplement and improvement for rational expectation theory.Second, this paper analyzed conduction mechanism of how expectation affects housing price in detail. This was rare in previous research. Existing research normally regards conduction process as black box without much attention. However, only when conduction mechanism is analyzed in detail, efficiency problem of real estate macro control policy can be understood in China. This paper has a meaningful attempt in this.Third, this paper analyzed whether our real estate macro control policy is valid, or not, in depth, based on expectation theory, especially why some policies malfunction. This is important and practical for our future real estate policy drafting, implementation, and also promoting real estate industry healthy development.
Keywords/Search Tags:expectation theory, conduction mechanism, real estate macro controlpolicy, quasi rational expectation model, validity
PDF Full Text Request
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