Empirical Study On The Impact Of Monetary Policy On Real Estate Price In China

Real estate is an important asset in a modern economy, with its price fluctuation having a great impact on economic growth, financial stability and social cohesion. On the other side, monetary policy is also important in a fully monetized society as a tool to regulate and fine tune the economy. This paper centers around the impact of monetary policy on real estate price, and tries to analyze this issue theoretically and empirically.First, this paper reviews the past researches of domestic and foreign scholars on the impact of monetary policy on real estate price, and related documents are consolidated and elaborated. Different scholars have different conclusions on this issue due to differences in angles, data, models and other factors. Then this paper describes the current situation of China’s real estate price and does a comprehensive analysis on a variety of factors affecting real estate price. The analysis shows that, in addition to monetary factors, other factors also push up the real estate price, such as increase of cost, land supply, housing demand, investment and speculative demand and government factor.The paper then does a theoretical analysis on the mechanism and channels of the monetary policy’s impact on the real estate price, elaborating how the monetary policy affect the real estate price through interest rate channel, other asset price channel, the exchange rate channel, the bank credit channel and the balance sheet channel. Basing on the theoretical analysis, the paper uses the relevant data to do the stationarity test, Granger causality test and cointegration test on the relevant variables, and builds vector autoregression model (VAR model) using monetary variables and real estate price. Basing on the VAR models established, the paper did the impulse response analysis to measure the impact on real estate price of narrow money supply (Ml), broad money supply (M2), financial institution loan balance (L) and interest rate (R), and estimates the time lag of these variables’impact on real estate price. The empirical results show that M1, M2and L have a positive impact on real estate price in the response period, while R has a positive impact from the1st to the5th period and has a negative impact after the5th period. The paper also notes that M1has the greatest impact on real estate price, followed by M2, R and L. Finally, according to the findings of this article, the author has put forward policy recommendations.