Research On Dynamic Inconsistency Of The Interest Rate To Housing Price

In recent years, China’s real estate price rose sharply, making real estate as the material basis of human production and living characteristics change. High prices not only let the ordinary people can not afford, but also stimulate the real estate speculation increasingly. Therefore, in order to stabilize housing price, the government had adopted various policies to regulate the real estate market, monetary policy also included. Interest rate as one of the three means of monetary policy, had always been used by the government, playing a key role in regulating the real estate market.The adjustment of the interest rate will affect the real estate market supply and demand at the same time.Generally speaking, the interest rate to housing supply and demand are both reverse relationship, but for their influence degree is different. This paper, by means of constructing partial equilibrium model to study on the relationship between the interest rate and housing price, the results show that, ceteris paribus, the change of interest rate on the real estate demand is greater than supply, therefore, to raise interest rate can lower housing price. In addition, we also have analyzed the influence of policy factors on equilibrium housing price, the influence of exogenous policy will cause deviation of the equilibrium housing price, the direction and degree of deviation depending on the condition of the policies impact the property buyers and developers.However, through comparing and analyzing relevant datum on the real estate market, we found that the interest rate policy on controlling housing price appear the strong inconsistency, namely to raise interest rates did not inhibit the trend of rising housing price, which means that the real estate market regulation has the problem of dynamic inconsistency. In this paper, based on previous research results, through the establishment of the mathematical model to explain the dynamic inconsistency problem, the results tell us,which is because that the inconsistency of the expectations between government and the public.In this paper, we also had adopted the quantitative analysis, by constructing econometric model to carry on the empirical analysis,in order to verify the correctness of the theoretical results. Specific approach is to build a six variables VAR co-integration model, to interest rate changes with the long-term equilibrium relationship between real estate price growth and short-term dynamic adjustment.The empirical results show that the interbank lending rate and housing prices is a negative balanced long-term stable relationship, but,between the 1 to 3 year benchmark lending rate and housing price exsit the the long-term stable positive equilibrium relationship, showing that the dynamic inconsistency problem in China’s real estate market does exist. Finally, based on the research conclusion in this paper, we put forward to improve the effect of regulating the real estate market interest rate policy and the solution to the problem of dynamic inconsistency.