Rmb Appreciation Associated With Real Estate Prices Effect Study

On July 212005, the central bank of China announced that the RMB exchange rate had been reformed. The RMB didn't peg to the dollar any longer, but also reference to a basket of currencies. It is to imply a more flexible exchange rate system. Since then, the RMB exchange had floated up for the first time. According to statistics, the nominal exchange of RMB against U.S. dollar had appreciated at the rate of 4.25% until February 2007. At the end of 2007, the U.S. subprime crisis erupted, and then deteriorated into the global financial crisis. With wide magnitude and long duration, the impact of this crisis has not fully dissipated yet. Although Chinese economy had maintained growing at the rate of 8% in this global resection, there was still a impact.on Chinese economy. With the improvement of the global economy, Chinese real estate industry has been gradually recovered. At the same time, the Western countries press China to appreciate RMB for their own economic and political purpose. Historical experience shows that a currency appreciation will affect real estate market. It is likely to lead to domestic asset bubble if not be handled properly.This article analyzes the impact of RMB appreciation on Chinese market in the perspective of relationship between the exchange rate appreciation and real estate prices. After reviewing a large number of relevant literatures, we state the liquidity effect, wealth effect, the expected effect and the spillover effects of exchange rate on the price of the real estate in details and find that the wealth effect can not be fully reflected in our current economic conditions. Through the comparison between Japanese and Germany responses to exchange appreciation, we find that even the appreciation of the currency will not cause the domestic economic shocks. if the country's monetary authorities can realize it's economic situation and maintain an independent monetary policy. Based on the theoretical analysis, this paper has made empirical test on the correlation between RMB exchange rate and real estate price and find that the RMB exchange rate moves in the same direction of the national and the Beijing's housing price index. We also find that there are no long-term stable relationship between RMB exchange rate and Xian's house price index...