Cross-city Differences In The Impact Of China's Monetary Policy On Real Estate Markets

Since 1998,China has dismantled the employment-based distribution of housing,and turned to market operation.China's real estate industry has made rapid development.The imbalanced situation of China's real estate markets in different cities has been gradually appearing.Especially after China's economy stepping into the "new normal",China's cross-city differences in real estate markets became even more obvious.In recent years,many monetary policies for the real estate market have been conducted.Yet,the effects of these unified monetary control policies are not ideal.This paper first discusses the influence of monetary policy on the real estate market and the reasons for the cross-city differences.It is pointed out that monetary policy mainly affects the real estate market through three transmission channels,namely interest rate,credit and money supply.Furthermore,the differences of the transmission efficiency of these three channels in different levels of cities in China are due to the dissimilarities in supply and demand structure of urban real estate market,the level of urban economic development,the financial system structure and the degree of marketization.Then,this paper makes use of the monthly data,from January 2011 to December 2016,includes the sales price index of new commercial housing in 70 large and medium cities nationwide,the benchmark interest rate of medium and long term loans for more than five years and the medium and long term loan amount of financial institutions to establish three VAR models of the first-,second-and third-tier cities in China.Through the Granger causality test,generalized impulse response analysis and variance decomposition analysis,the influence of different monetary policy on different tiers of cities is studied.The results of empirical test show that China's unified monetary policy can not form an effective regulation and control of the real estate market in different tiers of cities.Money supply and interest rate policy are effective means for the regulation of price of first-tier cities,and the interest rate policy is the most effective.For second-tier cities,the interest rate policy is effective,but the persistence is weak and should be strengthened by the money supply and credit rationing policy;for third-tier cities,the credit rationing policy is the most effective.Finally,based on the theoretical and empirical analysis results,this paper puts forward that the Chinese central bank should further improve the differential deposit reserve ratio system,promote the differentiated operation of various monetary policy instruments,enhance the independence and autonomy of the branches of the People's Bank of China,and should actively cooperate with other policies to regulate the real estate market in different cities in China.