Dynamic Analysis On The Real Estate Development Boom Index And Interest Rate

Real estate industry in China has been developing fast, since Chinese government reformed the regulatory framework of real estate on a large scale in 2000 years. Along with more and more serious real estate bubbles, the regulation in real estate market is much stronger than before. Interest rate is widely known as an important tool of controlling the real estate market. However, it is hard to prove that raising interest rate can moderate real estate price and to assess the effect of real estate rate. Therefore, this article’s research has meaning to optimize the interest rate policies, to improve regulatory mechanism. What is more, it is benefit to promote further development of real estate market. Through having collected monthly data of real estate market, this article conducts a quantitative study on the relationship of the real estate development boom index and interest rate by some method, for example:ADF test, co-integration test, vector error correction model, Granger causality test, impulse response function, ARCH model and so on. The result shows that the interest rate in China has a positive relationship with the real estate development boom index in the short term, but negative relationship in the long term, because of the interest rate policy which won’t work at once.At last, in order to make use of the interest rate to control real estate prices more effectively and optimize the interest rate mechanism further, this article come to the conclusion as shown below. First, we need to push on the process of interest rate marketization, to build an efficient and orderly financial market, and to establish the financial supervisory system. Second, it should be done that enhancing the management of real estate market’s supply and keeping the sensitive relationship by real estate price and interest rate. Third, it is only if interest rate and other economic policy come together that the way that using interest rate controls real estate can really work. At last, the real estate should be better-regulated so as to make the interest rate policies work effective.