The Research On The Dynamic Relationship Of Financial Deepening,Housing Price And Current Account Balance

This paper draws lessons from current international mainstream macroeconomics research method,conduct a more comprehensive and system study of the dynamic relationship of financial deepening,real estate prices and between the current account balance in China.The research will help delve into the dynamic impact of financial factors on the real estate price and current account fluctuations in the institutional transition process and enrich related research of the theory of financial development.The further analysis of the monetary policy reaction function also contributed to monetary policy in the field of economic theory.The conclusions also help the governmental monetary authorities grasp the overall status of China's monetary policy transmission channels exactly.This paper proposes targeted policy recommendations to promote China's monetary policy to control the economy effectively,guaranteeing the development of social economy healthy and harmonious.At the same time,the paper could also help financial institutions,enterprises and other social economic subject hold the pulse of the monetary policy,making right reactions and decisions about the monetary policy changes.So,in this paper,the research is valuable both theoretically and practically.In China,the financial market is in a stage of rapid development.The system,policy,technology and market environment of the financial market,in the past,present and foreseeable in the future a long period of time is in a constant state of change.Compared with western developed countries,China's economic system and financial environment are more complex.In present,the study about the dynamic correlation research and exploration of domestic financial deepening,property prices and current-account balances is less.In the real practice,the degree of financial deepening is increasing day by day,soaring property prices and volatility on current-account balances are making studies of related issues is particularly important and urgent,in addition,due to the lack of research on related theory make the process of enforcement of financial deepening reform and the graspment of the direction and scope are more difficult.Therefore,this article attempts to further study the dynamic relationship of financial deepening,housing price and the current account balance,meanwhile,explores the combination of monetary policy reaction function in order to provide certain basic theory and empirical support to theeffective implementation of monetary policy in China.In this paper,we firstly summarizes and review the literature of existing relevant theory and research about financial deepening,housing price and the current account balance in order to mimic the forefront and border of research topics,to provide the reference to the research of this article coordinates.On this basis,the study about the mechanism of ynamic relationship of financial deepening,housing price and the current account balance was conducted by building a new open macroeconomics dynamic stochastic general equilibrium model and combining the parameter calibration and bayesian estimation to determine relevant parameters value.Through the impulse response analysis,variance decomposition analysis,multiplier effect analysis and social welfare loss function analysis method to simulate characterizes by financial deepening of housing prices,current-account balances and other main macroeconomic variables.The results show that the direct investment shock,risk premium shock,mortgage rates shock and financial leverage shock caused by the financial deepening push up house prices and worsen the current account balance,fully explains the coexist currently real estate prices soaring and current-account balances growth slowed sharply in our country.Variance decomposition analysis found that the impact of the financial deepening can explain more than 20%of property prices and the current account balance fluctuation,which means financial deepening is the important factors affect China's real estate prices and current account;Finally,the social welfare loss analysis showed that in the four impact caused by the financial deepening,direct investment shock cause the minimum social welfare loss,and the financial leverage shock cause the maximum social welfare loss.In the part of empirical analysis,the econometric model of Markov-Switching Vector Auto-Regressions(MS-VAR)is used to empirically test the dynamic correlations of financial deepening,real estate prices and current account balances.The results showed that:(1)Both in the retardation and acceleration period of financial deepening,the financial deepening will significantly make contributed to rising property prices and inhibiting the accumulation of the current account balance,alleviating the reality of current account imbalances.The impact of financial deepening on housing prices and current account balance is very stable.(2)In the early stage,the current account surplus will raise the domestic real estate prices,the domestic real estate prices rise quickly can increase or decrease the accumulation of the current account balance.(3)Under different economic condition,the dynamic relationship between variables is not the same.In particular,under the condition of financial deepening relatively sluggish,housing prices rise could suppress financial deepening degree and under the conditions of financial deepening smooth will promote the further deepening of financial deepening.Secondly,takes advantage of the time-varying parameter vector auto-regressive model contains stochastic volatility(TVP-SV-VAR)to test the time-varying characteristics of the dynamic relationship of financial deepening,housing price and the current account balance.The conclusions are as follows:(1)financial deepening,house prices and the current account balance between show a strong time-varying characteristics.This fully shows that financial deepening,real estate prices and the interaction of the current account balance is time-varying and complex.(2)The impact of financial deepening on housing prices and current account balance is significant and stable.Financial deepening can significantly promote the real estate prices and inhibit the accumulation of current account surplus.Due to the process of financial deepening in our country at present stage in advance,such as interest rate marketization,relax capital account control,expand exchange rate flexibility,etc.,these measures are conducive to the development of financial deepening,rapidly rising housing prices and the inhibition of external imbalances in China,.(3)In different time or phase lag(early),the real estate price shock on financial deepening and current account and the current account shock on financial deepening and real estate price are uncertain.Then,the Bayse DCC-GARCH model is used to further analysis of the degree of dynamic relation of financial deepening,real estate prices and current account balance.The conclusions are as follows:(1)Using DCC model to analysis the dynamic correlation degree of financial deepening,housing price and the current account balance is reasonable.According to the model parameter estimation results,the fluctuations of financial deepening,real estate prices and current account balances are with asymmetry characteristics.(2)The risk of financial deepening and current account balance fluctuations are relatively small while the real estate price volatility risk relatively large.The figure shows that financial deepening,real estate prices and the current account balance have strong correlation between each other,but the related degree parameters are not stable.(3)the connection degree of financial deepening and real estate price is the highest while the level of real estate price associated with the current account balance is the lowest.In addition,financial deepening and the housing price present positive correlation except during "subprime crisis".and the financial deepening and current account balance show a negative correlation mostly,real estate price and the current account balance present a weak positive correlation.Finally,on the basis of above research building of generalized forward-looking monetary policy reaction function,and by using the macro economic data to estimate,in order to explore the monetary policy rules that fits Chinese situation more.The results showed that:(1)through the comparison we can find apparently the monetary policy reaction function model that contain property prices and current account balances elements is more active and fitting in response to the inflation level compared to the conventional model.(2)In examining all the tools of variables,the most comprehensive rule is market interest rate rule.The market interest rates will focus on the control of inflation,although the rule's response to inflation is only "adaptive",but the reaction is more outstanding in the introduction of housing price and current account balance factor of monetary policy reaction function model.(3)The comprehensive useing of four monetary policy tools suggests central bank is trying to use different monetary policies in order to achieve the goals of control.Based on the above analysis,we think the monetary policy reaction function that contains property prices and current account balance not only can better simulate the actual situation and more positive response to inflation.In addition,there are many kinds of monetary policy instruments in our country and various control targets together.Therefore,the monetary authorities not only needs a variety of monetary policy tools,but also need other macroeconomic regulation and control policy coordination.