Housing Price Fluctuation And Monetary Policy Choice

Since the reform of China's commodity housing system in 1998,the Chinese real estate market has achieved tremendous development.After the US financial crisis in 2008,the trend of China's housing prices began to fluctuate wildly.As real estate is a kind of special merchandise with the dual properties of normal commodity and financial attributes result that the sharp fluctuations in housing prices which have a tremendous influence in China's macroeconomic and financial stability.High house price and high leverage rate of enterprises are two prominent characteristics of China's financial market at present.They are also two important issues affecting China's future economic growth and financial stability.How to deal with these two problems effectively is the premise to avoid the burst of asset price bubbles and the bankruptcy of highly indebted enterprises.In order to analyze the relationship between the prosperity of the real estate market and the financial system,this dissertation introduces the real estate sector and the banking sector into the dynamic stochastic general equilibrium model,and creatively incorporates the financial frictions such as mortgage financing constraints,principal-agent problems between banks and depositors into the same analysis framework.In order to analyses how the financial system accelerates the prosperity of the real estate market,and how the prosperity of the real estate market increases the systemic risks in the financial system,this dissertation introduces macro-prudential policy on the basis of traditional monetary policy,compares and analyses the effects of the two kinds of policies on eliminating financial friction,adjusting economic fluctuations and preventing systemic financial risks,and creatively divides macro-prudential policy into directional macro-prudential policy and non-directional macro-prudential policy,which provides a theoretical basis for policy authorities to design new currency policy.Through the construction of DSGE model and the application of Bayesian estimation method,the main conclusions of this paper are as follows:Firstly,the relaxation of household credit restrictions by banks is an important reason for the prosperity of the real estate market.The relaxation of household credit constraints by banks will not only directly increase residents' housing demand and house prices,but also increase the value of mortgages,which will enable households to obtain more loans.The leverage effect of mortgage loans will further expand residents' ability to buy houses,thus accelerating the rise of house prices.Secondly,the excessive prosperity of the real estate market will increase the risk of the financial system.Since the family sector buy house through credit,the rapid rise of leverage increase the family financial risk.High housing price will inhibit the effective demand for housing,then the demand of land and new house will decline,which lead to the decline of land prices.Then the decline in government revenue will increase government financial risk.At the same time,high housing prices will inhibit the demand for commodities,increase economic growth uncertainty.Thirdly,the main cause of fluctuations in the real estate market are different from those of macroeconomic fluctuations,which makes the fluctuations in the real estate market inconsistent with those of macroeconomic fluctuations.Financial factors are the core causes of fluctuations of the real estate market,especially the relaxation of household credit constraints by banks is an important factor in the rapid rise of housing prices;while technological progress and fluctuations in government expenditure lead to fluctuations in macroeconomic variables such as output and investment.The fluctuation of real estate market is inconsistent with macroeconomic fluctuation,which is consistent with the economic data observed in China.Fourthly,the effect of traditional monetary policy on regulating the fluctuation of the real estate market is weak.Under the traditional monetary policy,interest rates are adjusted according to output and inflation.When output or inflation fluctuates greatly,the central bank influences asset prices by adjusting interest rates,and then influences household consumption-savings decision-making and investment decision-making,so as to achieve the purpose of macroeconomic regulation and control against economic fluctuations.However,the fluctuation of real estate market is not consistent with the trend of macroeconomic fluctuations.Although traditional monetary policy can reduce macroeconomic fluctuations,but it cannot reduce the fluctuations of real estate price efficiently.Fifthly,macroprudential policy strengthens the relationship between financial factors and macroeconomic variables.Under the macro-prudential policy,in order to prevent the lack of market liquidity leading to real estate market volatility and financial risk expansion,the monetary authorities will release liquidity to the market.This enables enterprises to obtain more credit funds,enterprises will increase capital investment,and then the output level will rise accordingly,which driving other economies to change accordingly.Sixthly,the directional macro-prudential policy reduces the fluctuation of the real estate market at the expense of macro-economic fluctuation.Technological progress and government expenditure are the main causes of macroeconomic fluctuations,but macro-prudential Prudential policy strengthens the impact of financial factors on macroeconomic fluctuations.Under the macroeconomic Prudential policy,in order to prevent the lack of market liquidity leading to real estate market fluctuations and financial risk expansion,the monetary authorities will release liquidity to the market.As macro-prudential policies have strengthened the impact of financial factors on macro-economy,the liquidity released by monetary authorities will reduced the volatility of the real estate market,but exacerbate macro-economic fluctuations.Seventhly,compared with the directional macro-prudential policy,the non-directional macro-prudential policy can not only reduce the fluctuation of the real estate market,but also significantly reduce the macro-economic fluctuation,making up for the shortcomings of the directed macro-prudential policy.Directional macro-prudential policy focuses on enterprise credit,liquidity release aggravates macro-economic fluctuations;non-directional macro-prudential policy focuses not only on enterprise credit,but also on family credit;enterprise credit aggravates macro-economic fluctuations,and family credit reduces macro-economic fluctuations,thus reducing macro-economic fluctuations.Based on the above conclusions,the policy recommendations of this dissertation are as follows:Firstly,the traditional monetary policy is difficult to effectively control the fluctuation of the real estate market,and should be used in conjunction with macro-prudential policy.Traditional monetary policy is used to stabilize macroeconomic fluctuations,while macroprudential policy is used to stabilize real estate market fluctuations.Secondly,when implementing macro-prudential policy,monetary policy should use non-directional macro-prudential policy,and its effect is better than directional macro-prudential policy.Non-directional macro-prudential policy can not only reduce the dependence of real estate market on financial factors,but also reduce the dependence of real economy on financial factors to make up for the deficiency of directional monetary policy.Thirdly,the government should stabilize the labor supply and reduce the fluctuation of the labor supply.Under the non-directional macro-prudential policy,the impact of labor supply has become an important factor driving economic fluctuations and real estate market fluctuations.With the rapid decline of China's population growth rate,even negative growth,and the rapid deterioration of population aging structure,the fluctuation of China's labor supply is increasing,which is not conducive to macroeconomic stability.Fourthly,Regulatory authorities provide“window guidance”for real estate loans of commercial banks,and guide commercial banks to establish a credit risk prevention and control system for real estate loans.Fifthly,Government departments can build a big data platform,release real estate market volatility data regularly,achieve big data information sharing,and provide data protection for real estate market supervision.