Money, housing, and inflation in China

Money, housing, and inflation in China

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Article ID: iaor2013426
Volume: 35
Issue: 1
Start Page Number: 75
End Page Number: 87
Publication Date: Jan 2013
Journal: Journal of Policy Modeling
Authors:
Keywords: China, public policy, real estate
Abstract:

This paper examines the relationship among money, housing, and consumer price inflation in China since 1998. We use a standard multivariate dynamic model and show that when goods prices are sticky, monetary growth is initially transmitted to the real economy via changes in house prices; the changes in house prices are then transmitted to consumer price inflation in China. The results indicate that the recent real estate market boom, mainly driven by excessive monetary growth, dominates the underlying pattern of inflation behavior in China. Relevant policy implications are also discussed.

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