While the traditional monetary transmission mechanism usually uses the equity and capital markets as monetary reservoirs, due to China's unique fiscal and financial system, the real estate sector has become China's 'invisible' nontraditional monetary reservoir for many years. Firstly, based on the perspective of the real estate sector as a monetary reservoir, this paper constructs a dynamic general equilibrium model that includes fiscal investment and financing and uses Chinese housing market data as well as central bank data on refinancing rates to financial institutions and GDP data for parameter estimation. We reveal the laws of the monetary transmission mechanism of the monetary reservoir-fiscal financing investment: Firstly, there is a commitment to pay and the existence of government utility. Secondly, local governments have an incentive to carry out credit expansion and investment and also financing operations through money pool assets, and there is a financing effect when the tax return on fiscal investment is higher than fiscal financing. Thirdly, the bubble effect is greater than the financing effect and it will push the monetisation of fiscal deficits when the financing effect is greater than the bubble effect and then the economic growth masks the credit expansion of local governments. In order to address the problem of monetary transmission mechanism under the perspective of real estate monetary reservoir, this paper carries out the design of a de-bubble financing mechanism for monetary reservoir assets.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.