Asset Price Booms, "Fat Tails," and Monetary Policy in East Asia-super-
AbstractThis study provides empirical evidence for the proposition that asset price booms matter because they tend to bring about the worst output, price, and inflation outcomes in the case of eight East Asian countries, namely, Hong Kong SAR, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, and Thailand. The main findings are: (i) asset price booms in housing and equity markets, especially in housing, significantly lower the conditional mean of real output growth and raise those of the price-level gap and inflation, and also raise the conditional variance of all three variables; and (ii) expected real output and price-level outcomes that are obtained without conditioning on asset price booms, or are obtained conditionally on asset price booms using the normal distribution, both underestimate the risk of the worst outcomes occurring and lead to less pessimistic but misleading inferences. These findings are not premised on the ability of central bankers to be able to identify correctly asset bubbles ex ante. One possible implication for monetary policy is that central bankers ought to be wary about the occurrence of any large increase in asset prices and consider an approach that is ex ante more compatible with risk management. (c) 2009 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by MIT Press in its journal Asian Economic Papers.
Volume (Year): 8 (2009)
Issue (Month): 1 (January)
Contact details of provider:
Web page: http://mitpress.mit.edu/journals/
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karie Kirkpatrick).
If references are entirely missing, you can add them using this form.