The Research On The Interaction Between Real Estate Price Fluctuations And Inflation

Along with the housing reform's implementation, the real estate industry in our country is more and more important in national economy's status for the past ten years. Since the housing reform is performed, China's real estate prices have been steadily risen, especially after 2003, the house prices rise sharply. The house prices and stock prices force China's overall price level to rise gradually, which leads to house prices and overall price level to rise at the same time until mid-2007.Thus house prices and inflation form a"double expansion"of the situation. How to develop the real estate market rationally and healthily and keep coordinated development of real estate prices and macro-economy on the basis of prices stability is a prominent problem placed in front of the Government and other scholars. Based on such practical considerations, this paper researches the interaction between real estate price fluctuations and inflation, which has a very important theoretical and presenting meaning for our government's macro-control.On the basis of research results at home and abroad, first, this paper analyzes the interaction between the real estate industry and macro-economy theoretically, then discusses factors affecting real estate prices and its defensive role of inflation, further to build an interaction framework of real estate prices and inflation. The final detail is their combing the interaction between the mechanisms. Second, we use analysis of the correlation coefficient, smooth test, co-integration analysis in VAR model, Granger causality test in short and long term to test empirical data in China. Third, according to the aforementioned theoretical analysis and empirical test results, we make a number of policy recommendations under the actual situation in China to provide to policy makers and academics for reference. Finally, on the basis of summing up the full text of theoretical analysis of the reality and the empirical results, we summarize the main conclusions of this article.This paper concludes: first, there is a positive correlation between real estate prices and inflation from the theoretical and empirical analysis of the interaction of real estate prices and inflation, which can also be well represented under the low inflation environment; rising commodity prices boost home prices, thus increasing housing and prices in the same time "spiral" economic pattern. Second, with the macroeconomic framework of analysis of real estate prices and the impact of inflation mechanism, interest rates and credit has played a very important role as a bridge. The interest rate and credit can affect the level of social consumption and investment, thereby affecting the overall level of aggregate demand and prices, which builds an interlinked platform between the real estate price fluctuations and inflation. Third, the"dual property"of the real estate prices'consumption and investment makes the sharp price fluctuations challenge the stability of the financial system. On the basis of maintaining price stability, the Government must focus on "financial stability" in the asset bubble in housing prices, etc. prior to the outbreak should be actively do a good policy response.