The Effectiveness Of Chinese Monetary Policy On Real Estate Price Regulation Research

In recent years, with rapid development of China’s real estate market, the realestate industry once became the pillar industry of national economy. Government’smacro-control has played an essential role in promoting its sustainable development.Considering monetary policy is an indispensable tool to regulate the real estate market.Changes of interest rates and monetary supply have a long dynamic influence on realestate prices. Therefore, this paper analyzed the affects of monetary policy have onreal estate price from both money supply and interest rates aspect.From theoretical perspective, the author illustrated common regulation tools ofreal estate prices against the change of monetary policy in China. Then it discussedthe mechanism of the effect of monetary policy to real estate price, including interestrate channel and credit channel. From empirical perspective, after a preliminaryanalysis of the effect of monetary policies by different orientation, this paper analyzesthe influences of monetary policy have on real estate price by comparative analysisbetween tight monetary policy stage and lax monetary policy stage. In each stage,firstly the author used ADF test, Cointegration test and Granger causality test todiscuss the correlation exists in interest rate, money supply and real estate prices, thenestablished the VAR model to examine the interplay among them. Finally the authoranalyzed different dynamic effect of China’s monetary policy to real estate pricethrough the impulse response function and variance decomposition by stage.Taking theoretical and empirical analysis results into account, the majorconclusions are as follows: there is negative correlation between interest rate and realestate price; money supply has a positive correlation with real estate price; real estateprice is significantly sensitive to money supply. The implication of tight monetarypolicies has a longer time lag compared with the implication of lax monetary policies.It will take about1-1.5years to achieve the maximum effect of tight monetarypolicies while it only takes1-2quarter to reach the maximum effect of lax monetarypolicies.Finally, based on the conclusions, the author proposed taking following measures:firstly, adopting a definite major purpose of monetary policy for regulating the realestate market and concentrating on timing monetary policy delay; secondly, pressingahead with the process of market-oriented interest rate, and give full play to the roleof interest rate channels; thirdly, improving the regulation of the money supplymechanism; finally, strengthening close cooperation of monetary policy with otherones and establishing and improving real estate market information system.