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Monetary Policy, House Prices, and Consumption in China: A National and Regional Study

Author

Listed:
  • Zan Yang

    () (Tsinghua University)

  • Shuping Wu

    () (Tsinghua University)

  • Yanhao Shen

    (Tsinghua University)

Abstract

This paper studies the relationships among monetary policy, house prices, and consumption in China from both national and regional perspectives. Using a panel vector autoregression (VAR) model and a counterfactual simulation method, we find that monetary policy has a significant effect on consumption but with a regional pattern, in terms of the magnitude and the housing wealth channel. It is found that in the middle southern and the western cities, the monetary policy has strong effects on consumption while the house prices have minimal contribution to the monetary policy transmission to household consumption. By contrast, in the Tier-1 and the eastern cities, house prices play a more important role in monetary policy transmission; even household consumption is less sensitive to monetary policy changes.

Suggested Citation

  • Zan Yang & Shuping Wu & Yanhao Shen, 2017. "Monetary Policy, House Prices, and Consumption in China: A National and Regional Study," International Real Estate Review, Asian Real Estate Society, vol. 20(1), pages 23-49.
  • Handle: RePEc:ire:issued:v:20:n:01:2017:p:23-49
    as

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    Keywords

    Monetary Policy; Housing Price; Household Consumption; VAR; Chinese Regional Market;

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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