| Japan's asset bubble in the 1980 s and the US real estate bubble in early 21 st century brought extremely serious damage to their economies and financial functions.Particularly,the burst of the US real estate bubble triggered the sub-prime crisis,and finally evolved into a worldwide global financial crisis.The global economic and financial stability was seriously damaged.Though many years had passed,however,the deep impact of the two bubble burst has not been completely eliminated up to now.Since monetization reform of the housing distribution in 1998,China's real estate market developed rapidly and the real estate prices were rising at most of the time.Especially in 2008 after the outbreak of the global financial crisis,the real estate prices rebounded rapidly and surged due to the launch of the large-scale economic stimulus plan.Then,under the effect of a series of escalating strict regulation measures,the real estate market was generally gotten controlled,and movements in different area diversified.After Chinese economy entered the phase of the new normal,because of increasing downward pressure on economic growth,the earlier strict regulation measures of the real estate market were gradually cancelled and diversification in different area became even more serious.The third and fourth tier cities were facing great pressure in absorbing their huge inventories,and the first-tier cities together with some key second-tier cities showed up extremely crazy rising out of expectations since the beginning of 2016.Rapid development of the real estate market not only brought profound influence to the life of the general public and became a hot topic with common concern,but also produced important influence on the macroeconomic regulation.As the most important macroeconomic regulatory instrument,monetary policy was suffering increasing influences and challenges from the real estate market.The statutory objective of China's monetary policy is to maintain the stability of the value of the currency and thereby promote economic growth.Traditionally the stability of goods and services prices was usually used to measure the stability of the value of the currency,thus maintaining the stability of goods and services prices became the main target of the monetary policy.From the lessons of asset bubbles in Japan and real estate bubble in the US,if the central bank only took the stability of goods and services prices and promoting economic growth as the objective of monetary policy,and took a liberal attitude towards asset markets,especially the real estate market,it may could not really achieve its statutory objective.Based on the background mentioned above,it is necessary to study the impact of the real estate market on the monetary policy and then explore how to effectively deal with it.This paper starts from real estate market's impact on monetary policy target system,and illustrates how real estate market influences ultimate objective of China's monetary policy and intermediary objective firstly.Then the degree of impact is studied.In order to avoid the occurrence of similar asset bubble in Japan and real estate bubble in the US,which eventually caused the monetary policies can not be able to achieve objective of maintaining the stability of the value of the currency and promoting economic growth,and finally how to deal with the impact is discussed.This paper consists of eight chapters.Chapter 1 introduces the background,purpose and significance of the study,together with literature review and research ideas,and so on.Chapter 2 is the framework of analyzing real estate market's impact on monetary policy.How real estate market affects ultimate objective of monetary policy,namely stability of the value of the currency and economic growth,and intermediate objective,namely money supply and credit scale.Chapter 3 uses input-output analysis method to study the influence of real estate prices to the goods and services prices and the influence of the real estate industry including housing construction activity to the economic growth,based on the adjusted national input output table of China in 2002,2005,2007,2010 and 2012.Chapter 4 and chapter 5 empirically analyze the relationship between real estate market and the intermediary objective of monetary policy,i.e.money supply and credit scale,by VAR models which are based on data from the first quarter of 1999 to the second quarter of 2015.In chapter 6 after analyzing the examples of Japan's asset bubble in 1980 s and US real estate bubble in early the 21 st century,their experiences and lessons are summarized,and the realities that the development of China's real estate market has influenced monetary policy are reviewed and analyzed.In chapter 7,how should the central bank deal with real estate market's impact on monetary policy is explored.After explaining the guideline and purpose of the central bank dealing with the impact of real estate market,and analyzing selection problems of general monetary policy tool and the selective monetary policy tools,optimal least squares method is used to estimate the Taylor rule type monetary policy reaction function which including the factors of the real estate market under the background that the conditions for China to take a interest rate-oriented monetary policy regulation are becoming more and more feasible.Chapter 8 is the main conclusions and policy proposals.The main conclusions of this paper are as follows:1.The change of real estate price has great influences on the stability of the value of the currency.The change of real estate price itself means the change of the value of the currency.The change of real estate price would also influence goods and services prices through channels like cost pushing,demand pulling and expectation effect.The development of real estate market would still reduce the rising pressure of goods and services prices which was brought by excess money through increasing the money demand.Discussion based on analysis by input-output price model discovers that the growth of real estate prices will have a stronger pushing effect on goods and services prices.On the one hand,the impacts of real estate price to product prices of various sectors are ascending collectively in the year 2002,2005,2007,2010 and 2012.The impact to product prices of the tertiary industry sectors is the largest among the three major industries.The impact to the second industry sectors is lesser and the impact to the first industry sectors is the smallest.The product price of manufacturing industry is affected the most in the second industry sectors.On the other hand,the influences of real estate price to the goods and services prices such as CPI,PPI and GDP deflator are rising generally as time elapses.CPI gets the largest impact,GDP deflator gets lesser and PPI gets the least impact.When real estate price increases 1%,its impact to CPI rises to 0.1288 percentage points in 2012 from 0.1017 percentage points in 2002,and accordingly,PPI rises to 0.0230 percentage points from 0.0180 percentage points GDP deflator rises to 0.1033 percentage points from 0.0986 percentage points.2.The development of real estate market has a significant role in promoting economic growth.As the proportion of value added of real estate to GDP is rising generally,the real estate itself has a strong pulling effect on economic growth.Furthermore,the real estate can also drive the development of its upstream industries such as steel,cement and mechanical equipment,together with its downstream industries such as decoration,household appliances,and furniture.Research by input-output analysis method discovers that though the driving coefficient of real estate industry(including house construction activity)ranks almost lowest in the 19 national economic sectors,indicating that its relative promoting effect on economic growth is small,but after considering the large size of the real estate industry(including house construction activity),the proportions of added value and output of the real estate industry(including house construction activity)in the whole economy rank almost highest in the 19 national economic sectors.The proportions of the former are 7.8%,7.7%,7.9%,9.5% and 10.2% in the year 2002,2005,2007,2010 and 2012 respectively,and its rankings lifted from the third in the former four years to the second in the fifth year.The proportions of the latter are 8.0%,6.3%,6.4%,7.2% and 8.1%,and its rankings lifted from the third in the former two years to the second in the latter three years.So the absolute promotion effect of real estate itself is great.Especially,according to calculations by hypothetical extraction method,if the linkage between real estate and other industry disappears,the sum of added value and output would decline further than if only real estate itself is eliminated.The former would decline 20.11%,18.12%,19.31%,21.71% and 23.03%,and the latter would decline 20.62%,17.25%,18.69%,20.49% and 22.11%.This further illustrates the linkage between real estate and other industry has significant role in promoting economic growth.3.The development of real estate market has great influence on money demand,exerts absorbing and diverting effect on money supply,and leads to change of the money structure.This could reduce the rising pressure of goods and services prices which was brought by excess money and change the traditionally stable relationship between money supply and goods and services prices.Findings from empirical studies of the relationship between real estate market and money supply for the angles of narrow money and broad money are as follows.The change of M1 growth rate could cause the change of goods and services price growth rate,real estate price growth rate and economic growth rate.The change of M2 growth rate could cause the change of real estate price growth rate and economic growth rate,but its impact on goods and services price growth rate is not significant.This indicates that in terms of impact on prices,change of M1 growth rate would be reflected in both of the change of goods and services price and real estate price,while change of M2 growth rate would be mainly reflected in the change of real estate price.As far as the impact of real estate price to money supply is considered,the change of real estate price growth rate would not lead to change of M1 growth rate,but lead to change of M2 growth rate and its general effect is negative.This means there is a certain substitutive relationship between real estate and M2 that has more obvious nature as assets.4.Real estate price can not rise without the support of credit,and real estate is also good collateral for loans.At the same time,the rise of real estate price further stimulates the expansion of credit scale,and there exists a mutual positive feedback mechanism between real estate prices and credit scale.Findings from empirical research of the relationship between real estate market and credit scale for the angles of broad credit(domestic credit)and narrow credit(loans by financial institutions)are as follows.The impact of domestic credit growth to the change of real estate price is not significant,but the change of real estate price does cause the change of the domestic credit growth.Change of growth rate of loan by financial institutions could cause change of real estate price,while change of real estate price also causes change of growth rate of loan by financial institutions.There is mutual positive feedback between real estate price and loan by financial institutions.5.Interest rate could play an important role among factors that could influence the growth of real estate price,money supply and credit scale,if the three are excluded respectively.Empirical analysis of the relationship between real estate price and money supply demonstrates that,deposit interest rate would produce negative effects on both real estate price and money supply,and exerts the biggest impact on the two if themselves are excluded respectively.Empirical study of the relationship between real estate price and credit expansion discovers that,lending interest rate would generate negative impact on both real estate price and credit scale,and brings the largest influence on the two except themselves respectively.These empirical findings imply that the adjustment of interest rates could not only have direct impact on real estate market,but also have indirect impact by affecting money supply and credit scale.6.Both lessons summarized from Japan's asset bubble and US real estate bubble and reality reviewed of impact brought by the development of real estate market to monetary policy in China shows that,it is urgent for China to take appropriate measures to deal with the influence that real estate market brought to monetary policy.In the bubble formation stage in Japan and US,good performance of economic growth,together with the relatively stable goods and services price,make BOJ and US Fed believe that loose monetary policy have been successful,thus ignoring that risks are accumulating in asset markets,especially in real estate market,failed to adjust monetary policy timely,and let bubble breed and expand in the environment of low interest rates.When they had to tighten monetary policy due to rising pressure of goods and services price,raising interest rates lead to adjustment of real estate market,and bubble burst caused serious consequences to the economy and financial stability.China's economy in these years also presents some typical characteristics that appeared in the bubble formation stage in Japan and US.China's policymakers should pay enough attention and take appropriate measures to deal with the influence brought to the monetary policy by the real estate market for the purpose of avoiding similar issues that had already happened in Japan and US.7.When it is really necessary for central bank to take measures to response to changes in the real estate market,prudent general monetary policy should play a dominant role and supplemented by selective monetary policy,as comparative advantages and characteristics of the two types of policies are taken into account.The main reason that why monetary policy should respond to the real estate market,is because of the fluctuations of real estate market would affect the effectiveness of monetary policy through their influences to monetary policy objectives system.Central bank does not need to respond to all changes of the real estate market,but only when the changes that might affect the effectiveness of monetary policy.The purpose of this action is to reduce shock that is brought to the monetary policy by the real estate market volatility,and not to bring down the price,stimulate inventory reduction,or simply regulate and control the real estate market.Research based on estimation of monetary policy reaction function in 4 different types shows that recommended interest rate calculated by Taylor rule which includes both real estate market factor and interest rate smoothing feature could fit the actual interest rate well.Specific results show that China's central bank gives the biggest weight to the output gap,the smaller to CPI and the smallest to the factors of real estate market when making decisions on its interest rate policy.This result means that China's central bank had already considered factors of real estate market in the past monetary policy decision-making.Under the background that the administrative control of interest rate has already been cancelled in China,the condition for adopting interest rate regulation is becoming almost ready.This result indicates that Taylor rule with both interest rate smoothing and real estate market factor could provide certain recommendation to future monetary policy regulation in China.Compared with existing research,the innovations of this paper are:(1)With regard to the research technique,the Input-Output price influence model is used to analyze the real estate price's influences on product prices of different divisions in the national economy and influences on the goods and services price indexes such as CPI,PPI and GDP deflator.(2)With regard to the research perspective,efforts are made to explain the mechanism that how real estate market influences ultimate objectives and intermediate objectives of monetary policy.This paper mainly analyses real estate market's effect to money supply and credit from the point of monetary policy mechanism.It is different from most existing analysis that focused on perspective of the promoting effect of money supply or credit to the real estate price.It may enrich the research on the relationship between the real estate market and the money & credit.(3)With regard to data processing,after consolidating data associated with house construction industry which is categorized to construction industry and that associated with real estate industry which is categorized to the service industry together,this paper gets the new real estate industry that includes house construction activity and the new Input-Output table.Then the driving effect of real estate is analyzed based on the new Input-Output,and the result is more comprehensive and more accurate. |
PDF Full Text Request