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Troy Mar 12, 2018
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Monetary Policy, the Fluctuation of Macroeconomic and the Prices of American Real Estate: VAR Model based Empirical Study

Author: Guofeng Zhang

Mentor: Linsen Yin

Abstract:This article established a VAR model to study the dynamic relationship between monetary policy, the fluctuation of macroeconomic and real estate prices in the United States based on the quarterly data from the first quarter of 1999 to the first quarter of 2015. It has found that the prices of real estate can be effectively influenced by adjusting the interest rate of mortgage, but the effect of adjusting M2 on housing prices is not obvious. Rising inflation in the short time can have a negative impact on housing prices. The fluctuation of housing prices is weak in relation to real GDP index and disposable personal income. Housing prices have a good regulation of their own role. In the short time, housing prices have a positive feedback mechanism to themselves. However, in the long term, they have a negative feedback mechanism to themselves. This mechanism ensures that housing prices will have an adjustment process after experiencing a rapid rise process. Considering that the economic and financial environment of China’s first-tier cities is similar to that of the developed countries, the conclusions of this article have some significance for the regulation of the real estate market in China’s first-tier cities.
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