Chinese Real Estate Sector under Precommitment and Discretion Monetary Policy Rule

摘要

This paper investigates the Chinese real estate sector under the precommitment and discretion monetary policy rule. We find two results by adopting Dennis's (2005) algorithms to solve for minimizing the loss function of social welfare. First, in response to the cost-push shock inflation returns to baseline slightly faster with precommitment than discretion, real estate output falls slightly more under the precommitment than under discretion, and a given movement in interest rates has a much more powerful effect on the economy under precommitment than it does under discretion. Second, the welfare gain from the precommitment is large: the percentage gain in welfare is 0.55 percent and the inflation equivalent is 0.22, when policymakers place an equal weight on inflation stabilization and real estate output stabilization.