Research On Transmission Effects Of Monetary Policy Through Real Estate Prices In China

Since the housing reform, there has been a rapid development in China’s real estate market. The real estate industry plays an increasingly significant role in economic growth, and has gradually become a pillar industry of our national economy. However, rising house prices have had a profound influence on China’s economic development, financial stability and residents’daily life. Then, the fluctuations of the real estate prices have attracted the attention of monetary authorities. In this economic context, there is a practical significance to research the transmission effect of China’s monetary policy through real estate prices.This paper focuses on how China’s monetary policy and tools influence the real economy through real estate prices, and whether the transmission mechanism is effective. In this regard, the article is arranged in accordance with the following ideas:First of all, the paper theoretically analyzed how the monetary policy affects the real estate prices, and how the fluctuations of real estate price affect the real economy. The specific channels of two links were summarized. Then, based on the analysis of the real estate market developments and reviews of monetary policy which was made and implemented in recent years, the paper made empirical and statistical observation about two aspects of the transmission of monetary policy through real estate prices. After that, we used monthly data of China from January,2000to December,2011, to make an empirical analysis on the transmission effect of monetary policy through the real estate prices in China. The period is divided into two stages and the empirical analysis is made by using impulse influence function and variance decomposition based on the foundation of VAR model (Vector Auto Regression Model).The main results of this paper are as follows:First, monetary policy is able to have a measure of influence over the real estate prices through both money channel and credit channel. Money supply makes more significant effect on house prices than interest rate. And credit channel can play a role in there as well. In recent years, transmission effects from monetary policy to the real estate prices has been higher. Secondly, transmission efficiency of the real estate prices on real economy is not ideal. The positive consumption effect produced by higher prices is weak, while the investment effect is more obvious. The real estate prices reflect some information about inflation, but still can not be the indicator of inflation. In addition, the effect of housing prices increase on economy growth is not significant. As a whole, there are some obstacles in the transmission of China’s monetary policy through real estate prices. So, the text proposes the striving direction for different department of national economy in the future.