A Study On The Effects Of China’s Excess Liquidity On The Price Of Real Estate Market

In recent years, the problem of China’s excessive liquidity receives wide attention ofthe society; the asset prices, especially the prices of real estate, which is rising too fast,have become a serious social problem. Both of them have become two focuses in theeconomic operation of China. Under the background of the excessive liquidity, this paperdiscusses the relationship between the excessive liquidity and the prices of the real estateaccording to the statistical data of recent years, and puts forward policy suggestions basedon the empirical findings.Firstly, this thesis analyzes China’s data of the money supply, the excessive supply,the differences between the bank deposits, loans and the bank credit scale in order and ithas proved the fact of the excessive liquidity in the microeconomic, and further talks aboutthe underlying causes of the excessive liquidity, which lies to the imbalance among thedeposit, the consumption and the investment ratio in our country’s economy.The demonstrated specific channel of the china’s excessive liquidity influencing theprices of the real estate is represented in such a way that the excessive liquidity promotesthe overheated development of the real estate, making the cost of developing the realestate higher and encouraging the speculative demand of the real estate. Based on theanalysis of the theory, the paper uses the empirical VRA to prove that the excessiveliquidity is indeed related to the rising prices of the real estate and the excessive liquidityis the Granger cause of the rising prices of the real estate.