The Dynamic Study On The Relationship Of Real Estate Prices, Bank Credit And Bank Stability

With economic development, real estate is becoming a leading industry forresidents’ consumption by making a significant pull effect on economic growth,employment expansion and the level of consumption.And the real estate developmentis inseparable from the financial support, financial stability is also inseparable fromthe healthy development of industry which the real estate industry is representativefor. The way how the two interact exactly is worth studying.Due to the close relationship between the development of China’s real estate andfinancial industries, stable real estate development therefore is directly related to thedevelopment of the national economy and stability of the financial system. Once therisk of the real estate market take shape, real estate bubble burst, it will lead tonational financial risks, endangering the stability of the national financial system,which would seriously affect the economic development of the whole country.This paper aims to study the interaction mechanism of real estate prices, bankcredit and bank stability. In the introduction, this paper describes the background andthe significance of this study as well as the research status at home and abroad, on thisbasis, the paper conduct a systematic exposition and argumentation about therelationship among real estate prices fluctuation, credit and bank stability from boththeoretical and empirical aspects.In theory, this paper first introduces and analyzes the situation of bank credit inChina’s real estate market, then comprehensively expounds the interaction mechanismamong real estate prices fluctuation, bank credit and bank stability. In the empiricalanalysis, this paper uses the time series data to make an empirical analysis on therelationship of real estate prices, bank credit and bank stability, describes how thebank credit and real estate prices fluctuates over time by using multivariate GARCHmodel well, also reflects the changes of bank stability. Based on the analysis above,this paper comes to the conclusion: the rise in China’s real estate prices and the creditexpansion of bank are driven by each other.The fluctuation of China’s real estateprices, credit fluctuation and the combined fluctuation all have a strong GARCHeffect, fluctuations in real estate prices and credit volatility is long-term, once theprice and loans fluctuations, such fluctuations in the short term will not be suppressed.Then the factors causing China’s bankinstability mainly includes fluctuations in realestate prices, credit fluctuation and the combined fluctuation which is mutually driven by the two. Besides, credits reduce and capital crunch caused by bank feedbackmechanism is not obvious.After theoretical analysis and empirical validation, at the end this paper putforward the suggestion to China’s real estate market and the real estate credit systemof bank.