China’s Real Estate Market,Treasury Bond Yield Curve And Monetary Policy

In recent years,with the rapid development of the real estate market,the real estate industry has gradually become a pillar industry in China.The rising house prices cause social concern.With the development of economy,China has gradually formed the coexistence pattern of "price monetary policy" and "quantity monetary policy".The central bank pays more and more attention to "price monetary policy" or interest rate indicators.The "price monetary policy" also pays more and more attention to the real estate market.This paper introduces the year-on-year growth rate of real estate sales and the yearon-year growth rate of real estate price into the Arbitrage-Free Extended Nelson Siegel(AFENS)model to study the relationship between the real estate market and the term structure of interest rate and monetary policy.In this paper,the dynamic interaction between real estate market and term structure of interest rate is studied by using impulse response and variance decomposition.Then,under the framework of no arbitrage,we study the impact of real estate factors(year-on-year growth of real estate sales and yearon-year growth of real estate price)on risk price and risk premium.Due to the"substitution effect" between the national debt market and the real estate market(with quasi financial market characteristics),the real estate factor will promote the rise of risk price.That is to say,the rise of house prices or the prosperity of the real estate market will raise the risk price,and then push the high,medium and long-term interest rates.To some extent,short-term interest rates can reflect the position of price monetary policy,that is,short-term interest rates respond to macro variables at the same time.In the framework of AFENS model,the short-term interest rate equation can capture whether monetary policy pays attention to the real estate market or house price to a certain extent.As the real estate market plays an important role in China’s economic development,the central bank pays attention to the economic development,and then indirectly focuses on the real estate sales index.There is regional heterogeneity in the response of monetary policy to real estate prices.Monetary policy pays more attention to the housing prices of first tier and second tier cities.