Since 2006, U.S.A. has witnessed the ups and downs of its economy caused by the bubble of the housing market. Due to China’s unique law, only enterprises can use properties as collateral to borrow from banks, resulting in emphasis on borrowing constraint of the enterprises. When housing price can change value of the collateral and borrowing ability of the enterprises, monetary authority is motivated to stabilize the housing price. Studies show that if the Loan to Value ratio (LTV) of the enterprises’ real estate loans is too high, risk would rise due to borrowing constraints. When housing price becomes lower, wrong monetary policy may continue to lower housing prices, causing great damages to enterprises’ balance sheet in recession. We conduct simulation research of China by DSGE (Dynamic Stochastic General Equilibrium) model in comparison with that of U.S.A., finding that China’s economy is more stable than economy of U.S.A.. One important reason is that the entrepreneurs in China are more constrained than those of USA which results in less risk in the economy. With negative monetary shock, besides markup, other economic variables fall, especially debt and housing price. This means that borrowing constraint is also a financial accelerator. Monetary authority should take into account the borrowing constraint of loans backed by real estate.
| Published in | International Journal of Finance and Banking Research (Volume 11, Issue 2) |
| DOI | 10.11648/j.ijfbr.20251102.12 |
| Page(s) | 37-45 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2025. Published by Science Publishing Group |
Monetary Policy, Housing Price, DSGE Model, Borrowing Constraint of Entrepreneurs
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APA Style
Guimin, H., Lili, M. (2025). Monetary Policy and Borrowing Constraint of Housing Market-a Comparative Research Between China and U.S.A.. International Journal of Finance and Banking Research, 11(2), 37-45. https://doi.org/10.11648/j.ijfbr.20251102.12
ACS Style
Guimin, H.; Lili, M. Monetary Policy and Borrowing Constraint of Housing Market-a Comparative Research Between China and U.S.A.. Int. J. Finance Bank. Res. 2025, 11(2), 37-45. doi: 10.11648/j.ijfbr.20251102.12
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Download@article{10.11648/j.ijfbr.20251102.12,
author = {Han Guimin and Mao Lili},
title = {Monetary Policy and Borrowing Constraint of Housing Market-a Comparative Research Between China and U.S.A.
},
journal = {International Journal of Finance and Banking Research},
volume = {11},
number = {2},
pages = {37-45},
doi = {10.11648/j.ijfbr.20251102.12},
url = {https://doi.org/10.11648/j.ijfbr.20251102.12},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijfbr.20251102.12},
abstract = {Since 2006, U.S.A. has witnessed the ups and downs of its economy caused by the bubble of the housing market. Due to China’s unique law, only enterprises can use properties as collateral to borrow from banks, resulting in emphasis on borrowing constraint of the enterprises. When housing price can change value of the collateral and borrowing ability of the enterprises, monetary authority is motivated to stabilize the housing price. Studies show that if the Loan to Value ratio (LTV) of the enterprises’ real estate loans is too high, risk would rise due to borrowing constraints. When housing price becomes lower, wrong monetary policy may continue to lower housing prices, causing great damages to enterprises’ balance sheet in recession. We conduct simulation research of China by DSGE (Dynamic Stochastic General Equilibrium) model in comparison with that of U.S.A., finding that China’s economy is more stable than economy of U.S.A.. One important reason is that the entrepreneurs in China are more constrained than those of USA which results in less risk in the economy. With negative monetary shock, besides markup, other economic variables fall, especially debt and housing price. This means that borrowing constraint is also a financial accelerator. Monetary authority should take into account the borrowing constraint of loans backed by real estate.
},
year = {2025}
}
TY - JOUR T1 - Monetary Policy and Borrowing Constraint of Housing Market-a Comparative Research Between China and U.S.A. AU - Han Guimin AU - Mao Lili Y1 - 2025/04/17 PY - 2025 N1 - https://doi.org/10.11648/j.ijfbr.20251102.12 DO - 10.11648/j.ijfbr.20251102.12 T2 - International Journal of Finance and Banking Research JF - International Journal of Finance and Banking Research JO - International Journal of Finance and Banking Research SP - 37 EP - 45 PB - Science Publishing Group SN - 2472-2278 UR - https://doi.org/10.11648/j.ijfbr.20251102.12 AB - Since 2006, U.S.A. has witnessed the ups and downs of its economy caused by the bubble of the housing market. Due to China’s unique law, only enterprises can use properties as collateral to borrow from banks, resulting in emphasis on borrowing constraint of the enterprises. When housing price can change value of the collateral and borrowing ability of the enterprises, monetary authority is motivated to stabilize the housing price. Studies show that if the Loan to Value ratio (LTV) of the enterprises’ real estate loans is too high, risk would rise due to borrowing constraints. When housing price becomes lower, wrong monetary policy may continue to lower housing prices, causing great damages to enterprises’ balance sheet in recession. We conduct simulation research of China by DSGE (Dynamic Stochastic General Equilibrium) model in comparison with that of U.S.A., finding that China’s economy is more stable than economy of U.S.A.. One important reason is that the entrepreneurs in China are more constrained than those of USA which results in less risk in the economy. With negative monetary shock, besides markup, other economic variables fall, especially debt and housing price. This means that borrowing constraint is also a financial accelerator. Monetary authority should take into account the borrowing constraint of loans backed by real estate. VL - 11 IS - 2 ER -
School of Business, University of Jinan, Jinan, P. R. China
School of Foreign Languages Teaching, Shandong Medical College, Jinan, P. R. China
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