The Interactions among Housing Price, Inflation and Monetary Policy in China: Facts and Implications*

Xu Zhong , Zhang Xuechun , and Zou Chuanwei
People’s Bank of China, Beijing, China
China Investment Corporation, Beijing, China

 
Abstract: As a transition economy, China has unique characteristics regarding housing price, inflation and monetary policies. In addition to supply and demand powers, China’s housing price is affected by demographic structure, fiscal system and land supply system.Using China’s statistics from 2005 to 2011, this paper found empirically that (1) liquidity has a significant impact on China’s housing prices and inflation; (2) China’s negative real interest rate has pushed up housing price; (3) price-related instrument of monetary policy can curb housing price and is more effective than control of money supply.

Key words: housing price, inflation, monetary policy

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