The Study Of The Relationship Between China’s Real Estate Price Fluctuations And Inflation

Since the real estate’ market-oriented reforms in1998, China’s real estate market has entered a period of rapid development, the real estate market are occupying an increasingly important position in people’s lives, and people are paying more and more attention to the relations between real estate price fluctuations and macroeconomic. One of the goal of China’s monetary policy is to maintain price stability, can inflation be affected by real estate rice fluctuations in the actual situation in China? Can real estate price fluctuations be affected by inflation changes? These are problems worthy of study. Today the real estate market are occupying a more and more important position in the national economy, there is complex relationship between real estate price fluctuations and inflation, studying the relationship between real estate price fluctuations and inflation has the double meaning in the theoretical and practical aspects. Starting from the analysis of China’s real estate market conditions and the history and current status of inflation, this paper studied the mechanisms and channels of influence between real estate prices and inflation from both theoretical and empirical aspects.First, the paper studied the interaction mechanisms of fluctuations in real estate prices and inflation through theoretical analysis. Theoretical studies showed that on the micro-level, the real estate price fluctuations have an impact on the behavior of residents’consumption and businesses’investment, thus affecting aggregate demand. In addition, the real estate price fluctuations also affect price level by the banks’ balance sheet effects. Finally the real estate price fluctuations though affecting the cost of raw materials, wages and other factors to affect inflation. On the other hand inflation through demand and supply affecting real estate prices. Inflation through rental price effect., the increasing value effect, money illusion effect and the effective interest rate effect affecting aggregate demand, and through affecting the production cost of the real estate industry to influence supply, thus affecting the real estate prices.Second, by choosing proxy indicators from1998to2012of real estate prices and inflation the paper made the empirical analysis on the relationship between China’s real estate market and inflation. Granger causality analysis indicated that whether in the long-term or short-term fluctuations in real estate prices are inflation" Granger cause. Cointegration test and vector error correction model test showed that there is long-term cointegration relationship between housing prices and inflation; and in the short term if the price level deviate from the long-term equilibrium, both can not be reverse self-regulation. VAR model analysis showed that house prices and inflation are influenced by each other’hysteresis value. The pulse analysis and variance decomposition test results showed that the changes in prices and changes in inflation have a large effect on each other.Finally, on the basis of theoretical analysis and empirical analysis and based on the actual economic situation of our country this paper proposed some policy recommendations:In order to improve the predictive ability of the real estate price on inflation.the monetary authorities should strengthen the regulatory and institutional construction of the real estate market to make the real estate market can truly reflect economic fundamentals and the real supply and demand. In order to effectively utilize the real estate prices, the monetary authorities should improve the interpretation ability on real estate price fluctuations. Monetary authorities should strengthen the monitoring of real estate prices and credit risk, rationalizing the size of credit and capital flows.