Research On The Real Estate Price And The Inflation Rate Of China

The stability of price is the ultimate goal of a nation's macro economy. Since the 1980s, the inflation in major countries and regions has been brought under effective control, and the double - digit inflation is rare. But frequent fluctuation of asset prices, as well as several systemic financial crisis and economic depression caused by the collapse of asset markets, such as the sub-prime mortgage crisis caused by the American falling real estate price, have forced the authority to research deeply the information conveyed by the asset price fluctuation, and to resolve it.Since 1998, Chinese housing system monetized reform, Chinese real estate market is going through a period of rapid growth and profound change under the promotion of banks' residential mortgage business and now real estate is a mainstay industry of civil economy. The rising price of real estate makes a tremendous contribution to the economic development, but also brings a series of problems, such as price inflation. Therefore, research on the mutual effects between the real estate price and the inflation rate of China will contribute to further understanding of financial stability and prices stability.This paper firstly analyzes the relationship of the real estate price and the inflation rate in theory, indicates that inflation rate influences real estate price directly or indirectly through four channels: replacement cost, wage income, rental return, credit rate. And then this paper studies on the general transmission mechanism from real estate price to inflation rate based on wealth effect, Tobin-Q effect, and balance sheet effect etc—research results of the notable American economist Mishkin. After that, the paper examines the relationship between the real estate price and the inflation rate by using structural mutation co-integration relationship and an error correction model, and draws a conclusion that there exists both long and short equilibriums relationship between the real estate price and the inflation rate. Finally, this paper gives related feasible suggestions combined the research results with actual circumstances in China.