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Monetary Policy, House Prices, and Consumption in China: A National and Regional Study

Author

Listed:
  • Zan Yang

    (Tsinghua University)

  • Shuping Wu

    (Tsinghua University)

  • Yanhao Shen

    (Tsinghua University)

Abstract

This paper studies the relationships among monetary policy, house prices, and consumption in China from both national and regional perspectives. Using a panel vector autoregression (VAR) model and a counterfactual simulation method, we find that monetary policy has a significant effect on consumption but with a regional pattern, in terms of the magnitude and the housing wealth channel. It is found that in the middle southern and the western cities, the monetary policy has strong effects on consumption while the house prices have minimal contribution to the monetary policy transmission to household consumption. By contrast, in the Tier-1 and the eastern cities, house prices play a more important role in monetary policy transmission; even household consumption is less sensitive to monetary policy changes.

Suggested Citation

  • Zan Yang & Shuping Wu & Yanhao Shen, 2017. "Monetary Policy, House Prices, and Consumption in China: A National and Regional Study," International Real Estate Review, Global Social Science Institute, vol. 20(1), pages 23-49.
    • Handle: RePEc:ire:issued:v:20:n:01:2017:p:23-49
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    Cited by:

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    2. Tan, Zhengxun & Tang, Qianqian & Meng, Juan, 2022. "The effect of monetary policy on China’s housing prices before and after 2017: A dynamic analysis in DSGE model," Land Use Policy, Elsevier, vol. 113(C).
    3. Yu, Jian & Shi, Xunpeng & Cheong, Tsun Se, 2021. "Distribution dynamics of China's household consumption upgrading," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 193-203.
    4. Wilhelmsson, Mats, 2020. "What role does the housing market play for the transmission mechanism?," Working Paper Series 20/5, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    5. Hu, Zhining, 2022. "Six types of government policies and housing prices in China," Economic Modelling, Elsevier, vol. 108(C).
    6. Mats Wilhelmsson, 2020. "What Role Does the Housing Market Play for the Macroeconomic Transmission Mechanism?," JRFM, MDPI, vol. 13(6), pages 1-17, June.

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    More about this item

    Keywords

    Monetary Policy; Housing Price; Household Consumption; VAR; Chinese Regional Market;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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