The Research On Regional Effects Of Monetary Policy On House Price In China

As the reform of housing system carried out in1998, the government of China has canceled the welfare housing and implemented monetization of housing distribution, which promoted the marketization of real estate. Afterwards, real estate prices rose continually and the real estate industry went through an unprecedented development, which gradually become the pillar industry of national economy. The high prices have far beyond the ability of many ordinary families, which affected the residents’quality of life and became an unstable factor for steady and rapid economic development.As an important means of macro-economic control and regulation, the monetary policy has played a very important role in the process of regulating the urban commercial housing price. In2004to2007, for example, in the face of overheating social investment and overly fast housing price rising, the government issued a series of tightening monetary policy, such as increasing the legal deposit reserve rate and the bank’s benchmark lending rate. However, economic development level of each region is not balanced and the real estate has an immovable property, which makes it a typical regional market. The real estate market supply and demand structure as well as the development level of each region is quite different. Meanwhile, China is in a period of economic transition, the regional economic and financial development is also very uneven. We can see from the actual results that the effects of the same monetary policy varied from region to region. So research on the regional effect of monetary policy on commercial housing price is quite necessary.In such context, this paper attempts to study the regional difference of how a variety of monetary policies have effects on house price, by means of qualitative theoretical analysis and quantitative empirical analysis. First, we introduce research background and research significance. Then review the related works in this area. After that, we analyze the theories as well as the status quo of how the monetary policy affects the house price. Finally, based on foundations mentioned above, we prove that monetary policy has different regional effects on house price, through empirical analysis of the four major economic regions, namely northeastern, eastern, central and western region. Eventually, we propose three policy recommendations:First, that tendentious monetary policy should be carried out in a targeted manner according to the real estate market; Second, financial and economic reform should be implemented differentially in four major regional; Third, other related approach should be cooperated actively to guide the development of the real estate market.The innovation of this paper is:First, region selection, according to the publication "Eleventh Five-Year’s specific ideas of region dividing", our country is divided into four regions, including eastern, northeastern, central, western, which has more practical significance; Second, research methods, the main advantage of VAR model is the ability to reveal the dynamic response changes between each variable, as a result, this paper will study the dynamic response to the impact of monetary policy on urban housing price; Finally, with regard to the selection of variables and data, we choose money supply, interest rates, financial institutions, loan balances and other monetary policy variables to compare and study its different impact and role on regional effects of urban housing price. Then select the real estate market monthly data in2004to2012to construct a longer time series and accurately reflect the long-term and short-term regional difference effects of monetary policy on urban housing price.Obviously, there are some inadequacies in this paper. First, we only considers the impact of variables representing the monetary policy tools on housing price in the model, while ignoring some other important variables which may affect the price, so there might be inadequate in explaining price changes; second, when choosing credit volume indicators of monetary policy, the actual amount of real estate loans is difficult to obtain, so this paper select the balance of loans from financial institutions. It represents the amount of loans of the financial institutions for all industries, the statistical range is relatively large, so the result might have less practical significance; third, the research perspective of this paper is not refined enough, mainly study from the overall real estate market of the four major economic regions, rather than the analysis of real estate supply and demand differences. The three points mentioned above will be improved in the future.