 How does house price influence monetary policy transmission?Yumei Guo, Xianjing Huang and Yuchao Peng International Review of Financial Analysis, 2020, vol. 72, issue C Abstract: The literature has focused on house price growth to explain the inefficiency of monetary policy. From the perspective of substitution, this paper explains the relationship between house prices and monetary policy considering not only house price growth but also house price uncertainty. By constructing a theoretical model including both financial-asset and fixed-asset investment, we find that expansionary monetary policy not only promotes total investment but simultaneously also leads to substitution towards financial assets. However, a rise in house price growth or house price uncertainty will mitigate the substitution effect generated by monetary policy. These propositions are supported by empirical data on China's nonfinancial listed firms from 2009 Q1 to 2018 Q3 and the results are robust to a variety of model specifications and empirical approaches. Our findings imply that real estate regulatory policy should coordinate with monetary policy in maximizing fixed-asset investment. Keywords: Monetary policy; House price; Asset substitution; Investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302398 DOI: 10.1016/j.irfa.2020.101595 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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