Monetary policy and housing prices; a case study of Chinese experience in 1999-2010
AbstractHow 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.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 17/2011.
Length: 38 pages
Date of creation: 22 Aug 2011
Date of revision:
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More information through EDIRC
housing prices; monetary policy; NARMAX; China;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-29 (All new papers)
- NEP-CBA-2011-08-29 (Central Banking)
- NEP-MON-2011-08-29 (Monetary Economics)
- NEP-TRA-2011-08-29 (Transition Economics)
- NEP-URE-2011-08-29 (Urban & Real Estate Economics)
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