Monetary policy rules and house price in Chinese economy

China´s monetary authority applies monetary policy instruments of both money supply and interest rates. This paper estimates the impact of positive monetary policy shocks (money supply shock and interest rate shock) on house price, and assesses the effects of house price shock on the real economy, using SVAR model spanning the period of 2001Q1 to 2009Q4. In the money supply system, the impacts of money supply shock on the GDP, CPI and house price are modest. Hence, the effectiveness of money supply as a dominant policy instrument in China should be questioned. In the interest rates system, the unexpected change in interest rate has significant effects on the house price, output and consumer price index, which indicates that the impact of interest rate as monetary policy instrument has become stronger over the last decade. In both monetary systems, house price shock affects the real economy strongly. This implicates that house price plays an important role in the Chinese monetary policy system.