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Troy Jan 28, 2018
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Quantitative Effect of Monetary Policy and Fluctuation of Real Estate Prices: Empirical Evidence from First-tier Cities

Authors: Guofeng Zhang; Chenghui Zhang; Dandan Song; Linsen Yin

Abstract:Taking the four first-tier cities on behalf of Beijing, Shanghai, Guangzhou and Shenzhen as examples, then by selecting M2 growth rate, leverage growth rate, growth rate of selling price of residential real estate, local GDP growth rate and CPI growth rate from 2001 and 2015 to build panel variable auto regression model (PVAR), we analyze relationships of house price growth rate, money supply growth rate and leverage growth rate. In addition, conclusions are drawing: First, M2 supply is absorbed in real estate market in the short term and reflected in CPI caused inflation in the long term. Second, the leverage manifests the negative correlation of high prices on account of the public’s expectation and initiative in macroeconomic control of government. Finally, the policy recommendations to maintain modest growth in M2, increase land use indicators, manipulate credit of commercial banks and adjust to expectation of investors are proposed.

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