The Study On The Impact Of House Price’s Volatility On Financial Stability In China

As the pillar industry of our country real estate industry in our country plays an important role in economic development, and connected with the financial system closely. First of all, the real estate market’s supply and demand require the intervention of financial system; in addition, the real estate market’s high profits makes all kinds of financial institutions more deeply into the real estate market. So deeply into the real estate market, financial system is exposing in the risk of real estate market while it promotes the development of the real estate market. Our country is currently in a state of abnormal high estate prices for a long time, and has accumulated a certain amount of an asset bubble. So, the stud of effect of house price fluctuations to financial stability has an important significance to maintain the financial stability. The main contents of this thesis is to study the impact of price fluctuations to financial stability in different economic environment in varying degrees on the basis of other scholars.On the basis of combing the relevant research at home and abroad, this paper studies the house price fluctuations, financial stability, and house prices’ impact on financial stability. Then this article selects the comprehensive index system of financial stability, including 4 first-level indicators, 16 second-level indexes, to build the financial stability index through the principal component analysis(PCA). We obtain the running status of financial stability from July 2005 to December 2015. Finally using threshold regression model, selection of real estate development loan balance, RMB real effective exchange rate fluctuations and stock market daily volume as a condition of the threshold, it is concluded that housing prices’ fluctuations in different economic environment to financial stability.By analyzing the theory and practice, this paper concluded that the house price fluctuations mainly affect financial stability through banking channels, exchange rates and capital markets. From 2005 to 2015, our country has experienced four stages. And in 2008 and 2015, our country experienced the negative contraction financial instability. At last, through empirical we get the following conclusion: when the real estate development loan balances is at higher levels, the influence of fixed house price fluctuation to financial stability is bigger. When he RMB real effective exchange rate index in the trend is rising, the influence of fixed house prices fluctuation to financial stability is bigger. When Stock market daily volume is small, the influence of fixed house price fluctuation to financial stability is bigger. When our country is in above economic environment, we should put the emphasis on house price fluctuations and financial stability, and take positive policies and measures to control housing prices.