IDEAS home Printed from https://ideas.repec.org/a/wsi/serxxx/v65y2020i06ns0217590818500145.html
   My bibliography  Save this article

Has Monetary Policy Caused Housing Prices To Rise Or Fall In China?

Author

Listed:
  • XIAO-CUI YIN

    (School of Economics, Ocean University of China, Science and Information College, Qingdao Agriculture University, P. R. China)

  • CHI-WEI SU

    (School of Economics, Qingdao University, P. R. China)

  • RAN TAO

    (Technological Center, Shandong Entry-Exit Inspection and Quarantine Bureau, Qingdao, P. R. China)

Abstract

This paper examines whether broader money supply (M2) and interest rate as two monetary policy tools may have differently affected housing prices in China. Empirical results show that there is a co-movement between housing prices and M2 in the short run and it becomes more pronounced after 2006 in the medium run. In addition, generally M2 positively affects housing prices. This supports the asset price channel which indicates that an easing monetary policy offers ample liquidity and results in raising the housing prices. The excess liquidity after 2008 spread to housing market, resulting in too much money chasing relatively few assets and triggering a surge in housing prices. On the other hand, we observe that co-movement between housing prices and interest rate is not very evident in most time. Moreover, we find that interest rate has a positive effect on housing prices which is not consistent with the user cost approach and indicates that a contracting monetary policy is not effective in curbing housing market. Not completely liberalized interest rate system and the high return on housing investments reduce the impact of interest rate on housing prices. These findings indicate that money supply is more effective than interest rate as channel to control the housing prices in China. The results are helpful for the scientific formulation of monetary policy for reasonable regulation of the market.

Suggested Citation

  • Xiao-Cui Yin & Chi-Wei Su & Ran Tao, 2020. "Has Monetary Policy Caused Housing Prices To Rise Or Fall In China?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(06), pages 1601-1618, December.
    • Handle: RePEc:wsi:serxxx:v:65:y:2020:i:06:n:s0217590818500145
    DOI: 10.1142/S0217590818500145
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217590818500145
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0217590818500145?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zarul Azhar Nasir & Noormahayu Mohd Nasir & Muhammad Adidinizar Zia Ahmad Kusairee & Siti Nur’Amalina Syeddin & Nor Zarina Mohd Salim, 2023. "Evaluating the Nexus between Monetary Sector Variables and Housing Affordability in Malaysia," Information Management and Business Review, AMH International, vol. 15(4), pages 31-40.
    2. Fennee Chong, 2023. "Housing Price and Interest Rate Hike: A Tale of Five Cities in Australia," JRFM, MDPI, vol. 16(2), pages 1-13, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:serxxx:v:65:y:2020:i:06:n:s0217590818500145. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ser/ser.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.