Monetary Policy, House Prices, and Consumption in China: A National and Regional Study
Author
Start Page / End Page
Volume
Issue Number
Year
Publication
Zan Yang, Shuping Wu, Yanhao Shen
23 / 49
20
1
2017
International Real Estate Review
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.
Keywords
Monetary Policy; Housing Price; Household Consumption; VAR; Chinese Regional Market