The Effect Of House Price Fluctuation To Chinese Monetary Policy Regulation

In recent years, China’s real estate prices have continued to rise. The government has adopted a variety of measures, but the effects are not ideal. The impact on the residents’ consumption and investment real estate market is larger and larger, therefore the policy effect of monetary policy will be affected by a certain degree. In this case, this paper mainly discusses that Chinese monetary policy whether needs to take the effect of house prices to gross demand into account, and that either quantitative tools or price instruments do a better job for our economy.In order to compare the regulatory effect of two kinds of monetary policy tools, this paper builds two economic systems, each economic system only uses one tool--either interest rate tool or money supply tool. In a single economic system, we build two economic models respectively which consider real estate prices or not consider real estate prices. Then we deduce the optimal interest rate rules and the optima money supply rules. Through simulation analysis, we could judge whether the regulation effect of monetary policy which considers the real estate prices is better. In order to build the model which considers real estate prices, we increase the house equation in the long type IS- Phillips model to compose a new simultaneous equation model with analyzing the Chinese economic data for 10 more years.The results show that: whether using interest rate or the money supply to control economy, if the monetary policy does not react to the house prices, the inflation rate is lower than the inflation rate under the situation that the monetary policy responses to the house prices, so do the loss function and the output volatility; comparing the effectiveness of the two monetary policy tool, whether or not considering the influence of the real estate price on total demand,the simulation results of the money supply tools perform more smoothly than the simulation results of interest rates tools, so the loss function value is smaller. Therefore, China’s priority should be given to the money supply tools at present when the central bank make monetary policy, and can be temporarily does not consider the effect of real estate prices to gross demand.