BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 17/2011:
Monetary policy and housing prices; a case study of Chinese experience in 1999-2010
Yanbing Zhang ()
, Xiuping Hua and Liang Zhao
Abstract: How do monetary policy variables affect housing prices? In
this paper we apply a non-linear modelling approach, the Nonlinear Auto
Regressive Moving Average with eXogenous inputs (NAR-MAX), to investigate
determinants of housing prices in China over the period 1999:01 to 2010:06.
The NARMAX approach has an advantage over prevailing methods in that it
automatically selects linear and non-linear forms of variables and the
numbers of corresponding lags according to statistical properties. Both
linear and non-linear estimation results identify a number of key monetary
and price variables, including most notably mortgage rate, producer price,
broad money supply and real effective exchange rate. Meanwhile, some key
real economic variables such as income are not independently significant.
Our findings should be helpful in understanding the formation of housing
prices in China and will provide some valuable insights on how to use
monetary policies to manage asset prices.
Keywords: housing prices; monetary policy; NARMAX; China; (follow links to similar papers)
JEL-Codes: C32; C67; E47; E52; (follow links to similar papers)
38 pages, August 22, 2011
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