A case study on finding efficient monetary policy to solve Shenzhen's excessive-priced housing

Abstract

Background The real estate market has developed rapidly since 1980s in Shenzhen, China. This study aims to find and investigate an efficient monetary policy to solve the excessive-priced housing problem in Shenzhen. Methods By regulating the contractionary monetary policy which are open market operation, the discount rate and legal reserve deposit can decrease the accelerating rate of excessive housing price in Shenzhen. Firstly, the relationship between housing prices and the other three tools of monetary policy has been analyzed. Then, from collecting the secondary data online, models were established by using the ordinary least square to find the correlation between housing price and money supply from 2011 to 2017. Results This model shows the relationship with the change of the logarithmic form of the amount of M2 and housing index is significantly positive. With the decrease in change of the logarithmic form of the amount of M2, the increase in housing index can be controlled in a relative decelerated rate. Conclusions In the reduced monetary supply, the housing price can be managed to an ideal condition and then it can help the government to achieve the goal of maintaining Shenzhen’s healthy real estate market development.