Abstract
The purpose of this paper is to analyze the dynamic impact of Interest Rate Policy on the Real Estate Market. In this paper we constructed a vector autoregression (VAR) model using five indicators and analyzed the response of the real estate market to the impulse of interest rate policy based on the monthly data from January 2003 to September 2010 in China. The results show that the Central Bank Reserve Ratio has a negative impact on the real estate market from a long-term perspective; and the lags of interest rate policy effect is longer, while action period is shorter from a short-term perspective. So we consider that the Interest Rate Policy does not play a significant role in the regulation of real estate market in this paper.
Highlights
In recent years, the industry of real estate has developed rapidly in China
At the sight of long-term stable relationship, the Central Bank reserve ratio has a negative impact on the real estate market, which means that the Central Bank reserve ratio affect both the real estate market demand and supply negatively
In the short term, using vector error correction (VEC) model and impulse response function analysis, we can see that acreage of property sales will descend and newly started acreage of real estate will decrease if reserve ratio is exerted by positive impact
Summary
The industry of real estate has become the lifeblood of the economy in China. It is pulling more than 50 industries, from the upstream industry such as iron, steel and building materials to the downstream industry such as household appliances, curtains and even ceramic tile. It has a very strong pulling power." Jingyuan Yao, the chief economist from the National Bureau of Statistics said (2009). The booming housing price has been moderately curbed and the real estate speculation has been strongly hit under the micro-control policy
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