Heterogeneous Impact of Monetary Policy on China's Real Estate Market

Abstract

This paper examines whether the broad money supply (M2) and the interest rate as two monetary policy tools will have different effects on housing prices. A sample of 10 listed real estate companies was analysed using panel vector autoregression (PVAR) models, using data from 2007 to 2020. The empirical results show that there is a correlation between housing prices and M2 in the short term, which is even more obvious in the medium term. Overall, M2 has a positive impact on house prices. On the other hand, the three-year loan rate has no significant impact on housing prices in the short term, but has a negative impact on housing prices in the long term. After the pulse response analysis, the money supply has a more significant impact than the interest rate on the real estate price, and has a better effect in controlling the housing price. The research results contribute to the scientific formulation of monetary policy and the reasonable control of the market.