A Study On The Impact Of Money Supply And Bank Lending On Commercial Housing Prices

The control effect of monetary policies on real estate prices is one of hot academic issues. Under the condition that the interest rate has not been fully market-oriented in China, the influence of quantitative monetary variables, such as money supply and bank lending, exacting on real estate prices is highly concerned. During the latest twenty years, the real estate market in China has been quickly developed, and real estate prices are soaring, threatening the healthy development of the national economy. Regulating and controlling real estate prices become some of the main difficulties that Chinese government faces. Although Chinese government has announced a series of monetary policies to adjust housing prices, but these policies were failure to achieve the regulating goal as expected. How do money supply and bank lending affect real estate prices? The effect is weak or strong? Based on the basic theories of monetary banking and real estate finance, this paper studies the effects of money supply quantitative movements on commercial housing prices by analyzing money supply, bank lending and the real estate market in China.Firstly, this paper analyses the impacts of money supply and bank credit on housing prices in theory. Through the comparative analysis between domestic and foreign relevant researches, this paper indicates that it is the future research topic to discuss the different dynamic effects of money supply on commercial housing prices in different period. Then, on the bases of descriptive statistical analyses, this paper empirically studies the dynamic influences of the money supply shock and the bank credit shock exerting on commercial housing prices by using SVAR model, and draws conclusions as follows: (1) There are evidences of Granger causality going in both directions between total loans growth rate changes and commercial housing price growth rate changes, and between real estate development loans growth rate changes and commercial housing price growth rate changes. Also Granger causality appears to go from house purchase loans growth rate changes to commercial housing price growth rate changes. (2) In short term, commercial housing price growth rate increments tend to positively respond to a standard deviation shock of money supply, and negatively respond to a standard deviation shock of total loans, real estate development loans and house purchase loans. Besides, the money supply shock is the most long-lasting factor for the fluctuation of property price growth rate. (3) The most important factor for commercial housing price growth rate volatilities is commercial housing price shock itself in the first term but become money supply shock after the second term, which again proves that money supply is the most influencing quantitative factor for commercial housing price fluctuations. Finally, this paper puts forward some policy suggestions to improve the regulation and controlling effects of monetary policy, and presents that monetary authorities should pay more attention to quantitative monetary variables such as money supply, total loans, real estate development loans and house purchase loans etc., and apply different monetary policies to adjust housing prices according to the actual situation. Specific measures are as follows: to adjust the intermediate target of monetary policy; to keep the steadiness of monetary policies regulating and controlling real estate prices; to adopt various monetary policies; to improve the foresight of monetary policies.