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

Zan Yang (), Shuping Wu () and Yanhao Shen
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Zan Yang: Tsinghua University
Shuping Wu: Tsinghua University
Yanhao Shen: Tsinghua University

International Real Estate Review, 2017, vol. 20, issue 1, 23-49

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 (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2017
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