The Impact And Risk Of House Price Fluctuation To Money Supply

In recent years,China’s real estate prices have become the focus of the theoretical and practical circles.The average price of commercial housing has risen from 1,854 yuan per square meter in 1998 to 7,892 yuan per square meter in 2017,an increase of 426%.At the same time,China’s broad money supply M2 increased significantly,from 10.44 trillion yuan in 1998 to 167.68 trillion yuan in 2017,an increase of 1606%.The simultaneous rise in house prices and money supply M2 has led most scholars to believe that the central bank’s large amount of “printing money”has led to rising house prices,but there are also a few scholars who believe that money is endogenous,determined by multiple factors and subjects in the economic system.The rise will lead to an increase in the money supply.What is the relationship between house prices and money supply M2 and the potential risks of excessive house price volatility? It is worthy of further study.Firstly,this paper reviews the literature on domestic and foreign scholars’ interest rate fluctuations,money supply M2 and money creation theory.It is found that domestic and foreign scholars do not have a unified view on the relationship between house prices and money supply M2,and the relevant literatures are mostly empirical.Lord,theoretical research is relatively lacking.Then combing and reflecting on the traditional money supply theory of Keynes and Friedman,pointing out the two natures of money.Secondly,this paper seeks the relationship between the real estate price and the change of the money supply and the structural decomposition of the broad money supply M2.Then,it demonstrates the principle of monetary creation in different stages of real estate development,and analyzes the transmission mechanism of house price affecting money supply from three aspects: local government,real estate developers and residents buying houses,and conducts empirical analysis on this basis.Finally,this paper comprehensively measures the scale of personal housing loans,development loans and real estate mortgage loans at the end of 2017 and combines the indicators of house price-to-income ratio,rental return rate and vacancy rate to conduct risk analysis on the real estate industry.The study found that money has endogenous characteristics,that is,the essence of money is a creditor-debtor relationship.The central bank puts in the base currency,commercial banks make loans,and “loans create deposits” instead of “deposit creation loans”.Through the empirical analysis of the VAR model of commercial housing price and M2 proxy variable(real estate loan balance),the results show that there is a mutual causal relationship between house price and M2 proxy variable,whether in the short-term or long-term,the growth rate of M2 proxy variable Feedback on house price changes is positive.For every 1% increase in house price growth,the M2 agent variable will increase by 0.37% year-on-year.In addition,from the results of cointegration test and impulse response,in the short term,the medium and long-term loan interest rate of commercial banks will have a certain shock effect on the growth rate of real estate loans;in the long run,interest rates have a negative feedback effect on the growth rate of real estate loans.The innovation of this paper is mainly in two aspects: First,the innovation of research perspective.From the perspective of currency creation,analyze how money is derived and what kind of relationship exists between house prices and derived currencies.Second,the innovation of research methods.The structural decomposition of money supply based on the whole process of real estate development is no longer limited to total analysis.However,subject to the length of the paper,the theory of currency creation is not comprehensive enough,and the empirical model follows the methods commonly used in the past literature,and there is no breakthrough.