The Study Of The Relationship Of M2and Housing Price In The Growth Level: Theory And Empirical Analysis

With the advancement of the process of financial deepening, the real estate market interacts more with the financial market, the impact of fluctuations in real estate prices on the national economy thus would be more penetrating and extensive. Therefore, the real estate market which has gone through irrational exuberance and often followed by the real estate bubble burst would have more destructive and more profound effects on the financial stability and even on the whole economy, which has been repeatedly proved by the empirical experiences of many countries in the history and has provided lessens for our country. As the most important indicator of the money supply, M2reflects the realistic and potential purchasing power of the economic society; by observing the growth cycle of currencies since mid1996, China’s M2growth tends to change with a pilot compared with MO’s and Mi’s growth; moreover, M2has a significant reference value for understanding the middle market and investment market. As the real estate has dual properties of consumption and investment, this paper selects M2and housing price as the study topics, and sets the accumulation of currency aside to examine the relationship between M2and housing price on the level of growth, which has a practical significance as China has the phenomenon of the mystery of the currency.Based on the former research fruits focused on the topic of M2and housing price, this paper summarizes the mechanism of how M2and housing price interacts with each other, and then respectively conducts the qualitative and quantitative analysis of the growing rate of M2and of the real estate price in China. Through the qualitative analysis, we find that M2’growth rate is highly correlated with the developing condition of the real estate market, which is manifested in the high correlation of M2’ growth rate with the growth rate of the national housing climate index and with the growth rate of investment in the real estate market. In the quantitative analysis, this paper selects variables on the basis of the theory of the demand for money. By building five variables cointegrating VAR model, this paper examines the long-term relationship and the short-term dynamic adjustment of the growth rate of M2and that of the housing price. The empirical results show that M2’growth rate has a stable, positive relationship with the growth rate of the housing price in the long run, that is, the growth rate of M2has a notable impact on promoting housing price’growth rate; in the short term, the growth rate of M2has a positive response to the housing price’ increasing rate impulse, which, however, is much less notable compared to the response of the housing price’s growth rate to positive impulse of the growth rate of M2. Finally, based on the conclusions of this paper, this paper puts forward relevant proposals and also prospects for the future improvement of the research of this topic by acknowledging the shortcomings of this article.