The Influence Of Real Estate Market Fluctuation On Financial Stability

Since 1998,China has gradually embarked on the road of housing allocation monetization,the volatility of real estate market increased,prices and investment rose rapidly,the real estate market bubble continued to expand.In recent years,people’s discussion on the real estate market volatility and financial stability has become very enthusiastic,reflecting the impact of China’s real estate market volatility on financial stability can not be ignored.At the same time,our government’s concern about the real estate market is also rising,the frequency and intensity of regulation of the real estate market increased.On the basis of the:previous austerity policies,some cities in 2016 continued to introduce the upgrade policy,strictly implemented the real estate market control policy,raised the threshold of purchase,standardized the price of commercial housing,adjusted the provident fund policy and strengthened market supervision.In 2017,the government of our country has continued to implement the concept of "the house is used for living and not for speculation",and insisted on the regulation and control of the real estate market.This shows that our government intends to strengthen its supervision over the real estate market so as to reduce its unfavorable impact on the financial system.Therefore,this study of real estate market volatility on the impact of financial stability has great practical significance.This paper makes a systematic introduction to the related theories of both domestic and foreign literatures about the fluctuation of real estate market and financial stability.The article analyzes the impact mechanism of the real estate market volatility on the financial stability from the four channels of bank credit,shadow banking,wealth effect and Tobin’s q effect.It also makes a comprehensive analysis of the status quo and existing problems of the real estate market in our country,followed by the use of principal components analysis to build a financial stability index from January 2005 to December 2016,measuring the level of China’s financial stability.Then,this article uses the MS-VAR model to divide the fluctuation of the real estate market into two zones:smooth fluctuation and high fluctuation,in order to verify the influence of two different degrees of fluctuation on the financial stability.The empirical results show that:Firstly,compared with the linear VAR model,the nonlinear MSIAH-VAR has better fitting effect and explanation.Secondly,the smooth fluctuations in the real estate market is conducive to financial stability,while the sharp fluctuations in the real estate market will have a negative impact on financial stability.Thirdly,according to the result of impulse response analysis,we find that the impact of real estate market volatility on financial stability is not great in the real estate market with low volatility,but fluctuations in real estate market will produce financial stability in the real estate market with high volatility,which has made the financial system more vulnerable.In the end,pursuant to the conclusions derived from theoretical and empirical analysis,starting from the existing problems of China’s real estate market and how to reduce the financial risk,this thesis puts forward the suggestion that government should maintain the stability of the real estate market,and gradually make housing prices return to a reasonable level,financial institutions in the real estate market should reduce the risk exposure degree,in order to better maintain financial stability.