Research on China's real estate housing price Paper

On China's real estate housing price - Research Paper Example Marketing research statistics that were taken in the past five years indicate that in the property market, role of pricing mechanism is to balance purchase and the rates of selling. In this study, we are attempting to examine the determinants of the housing prices in China, with a particular focus on the monetary variables. There are three main concerns, which motivate this study. These are the exploration of the general relationship that exists between the pricing of houses and the monetary policy, even though the Chinese experience might not be ideal. We also feel that it is important to use the non-linear modeling concept known as NARMAX that selects forms and lags structures in an automatic manner for the individual explanatory variables. Lastly, the study hopes to draw some essential policy implications for the housing prices management in China. BACKGROUND/HYPOTHESIS A fall in the housing prices that started in the year 2007 ultimately resulted to the worst economic recession a nd financial crisis in the world in nearly eight decades, or eighty years. However, underscoring this important debate is the more complex academic question regarding the relationship between asset price and monetary policy. The maintenance of price stability is largely considered to be the most fundamental monetary policy’s goal. In this framework, the price stability is usually defined as the consumer price index’s stability. In the years ensuing to the world financial crisis, the China experienced a period of fast growth in her Gross Domestic Product with modest consumer price index inflation. Thus, there was no need for the government to increase the rates of interest or even tightening the liquidity conditions. Since the global crisis, we find that there has been rising recognition among policymakers and economists that it is important that the central banks monitor asset prices together with the prices of goods. However, it is still not clear whether it is feasib le for the formal incorporation of asset prices into the objective function of monetary policy. Nevertheless, even if this is possible, it is quite difficult to control the asset prices as compared to the regulation of the prices of goods. In trying to establish real estate pricing in China, it is therefore important to consider answering the following question: What is the effect of monetary policy on asset prices? What are the determinants of real estate pricing in China? What are the trends in the house pricing in China? ANNOTATED BIBLIOGRAPHY/ LITERATURE REVIEW Hongli Z. 2011. The Relationship of House Price Rising Rate and GDP Growth Rate. Mason, OH, Cengage Learning. In this context it is well illustrated that the development of the real estate industry is very important to the people`s livelihood and the national economy. The real estate regulation is very significant content of the microeconomic regulation and it is also invariably controversial. The regulation of house pric e such as controlling the house price`s rising extent within the normal range is a Key to real estate regulation1. According to the calculations of the target range in house price regulation, the house price growth rate/GDP should be controlled within {- 0.31, 0.86} among the first-tier cities and [-0.42, 1.17] among the second inter-cities. China has made real estate regu