The purpose of this study is to analyze the relationship between real estate prices and bank loans while considering other related macroeconomic variables such as money supply, price index and interest rate. The research sample is adopted from 120 monthly data ranging from January, 2005 to December, 2014. I apply time series analysis including unit root test, cointegration test, vector error correction model, Granger causality test, impulse response analysis and forecast error variance decomposition.
Empirical results show that all variables become stationary after one difference in the unit root test. The cointegration test displays all variables exhibit a long-term equilibrium relationship. The results in the vector error correction model indicate that one-month lagged real estate price negatively affect real estate price; one-month lagged construction loan and one-month lagged housing loan have positive impacts on construction loan and housing loan respectively. The Granger causality test finds that housing loan causes money supply, money supply causes real estate price, and real estate price causes construction loan. Lastly, money supply and interest rate have significant impulse effects on real estate price while real estate price has significant impulse reactions to construction loan and housing loan.
