An Empirical Study on the Interaction between Housing Prices, Interest Rates and Macroeconomics in China
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This paper examines the interaction between housing prices, interest rates and macroeconomics in China, and studies the monthly time series data of the National Bureau of Statistics of China from 1998 to 2022 through vector autoregression. There are two main conclusions that can be obtained about housing prices. First, housing prices are the Granger reason for the growth of money supply. Rising housing prices will cause a reverse change in the growth rate of money supply, with the impact reaching its maximum in 1-8 months. Second, the rise in housing prices is the Granger factor of interest rates. The reason is that rising house prices will cause interest rates to change in the same direction with the impact growing gradually over time. This result reflects the fact that the Chinese government usually adopts control policies to reduce M2 growth when housing prices grow too fast, and also takes measures to moderately raise interest rates, both of which are manifestations of the government's tightening monetary policy. In other words, the government in China will tighten the monetary policy to cool down the property market when the price growth is excessively high.
Real estate prices; Interest rates; Macroeconomics; Monetary policy