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Using VAR Model, this paper constructs a dynamic relationship system among house prices, price level, economic growth, monetary policy and unemployment rate. Discussed the impact of house prices fluctuation on some of china's key economic variables, especially monetary policy. Granger causality test showed that the price fluctuations is the Granger reason which changes monetary policy, economic growth and price level. According to the analysis of VAR (2) model, house price increase has some impact on china's economy: money supply increase, higher price level, slower economic growth, and higher unemployment rate in the long run. The positive impact of the higher- rising house prices forces the central government to adopt an expansionary monetary policy, which in turn causes much higher price. Variance decomposition analysis showed that the house price fluctuations on the impact of monetary policy, the lagged effects of the existence of about three months. It proves through the polynomial AR of the calculating model that VAR (2) model is stable, that is, China's economy can develop smoothly and orderly through the automatic adjustment of the market and the macroeconomic control of the government.