Monetary Policy and Housing Prices: Expansion of the Fictitious Economy in China

A fictitious economy is the product of a highly developed economy, and is represented by bank capital, stocks, and bonds. Based on the economic reality of China's continuously expanding fictitious economy and rapidly rising housing prices in recent years, a structural vector autoregressive model is constructed and employed to show that, in the short term, the fictitious economy contributes most to the fluctuations in housing prices, followed by the interest rate, while money supply plays a very small contributory role. However, in the long term, the influence of the fictitious economy decreases, and the monetary policy and real economy will be the main factors influencing changes in housing prices.