Dynamic relationship between real estate prices and inflation rate

Abstract

This thesis studies the dynamic relationship between China's real estate prices and inflation rate by examining the relationship between the Consumer Price Index and Nanjing housing sales price index, to use cointegration test, the VEC model and Granger causality test, the results show that both indices are Granger causality to each other, and there is a long-term stable cointegration relationship between them. At the same time, no significant volatility spillover effects between house prices and inflation rate are found by using GARCH model to volatilities of both indices. Finally, we choose the Impulse Response Function and get the conclusion that the impact between house prices and inflation rate is asymmetric, and is not obvious in the short term but significant in the long term. By the main conclusions of the above analysis, we give some useful recommendations and countermeasures in order to provide the theoretical basis for investors and decisionmakers to make decisions.