Understanding Asset Prices: Determinants and Policy Implications
AbstractThe paper provides an overview of recent asset price developments in France in the light of analytical research carried out at the Banque de France. Like in many other countries, historically low interest rates have boosted asset price dynamics in France over recent years. The paper attempts to shed light on the main driving factors and assesses, in particular, the role played by "excess liquidity" in shaping current developments. Additional factors related to fierce competition in the French banking sector have also contributed to the upswing in residential property prices, exacerbating households' demand through credit expansion and leading to a sharp and unprecedented increase in household debt, consistent with a financial-accelerator-like mechanism. On several occasions over the past two years, the Banque de France has expressed its concerns about lending for housing purchase and housing price developments, both from a monetary and a financial stability perspective. Finally, the paper presents some views, based on in-house research, on the role, if any, that asset prices could play in the setting of monetary policy.
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.
Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 168.
Length: 32 pages
Date of creation: 2007
Date of revision:
Asset prices ; Monetary policy.;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Idier, J., 2006. "Stock exchanges industry consolidation and shock transmission," Working papers 159, Banque de France.
- Christian Bordes & Laurent Clerc & Vêlayoudom Marimoutou, 2007.
"Is there a structural break in equilibrium velocity in the euro area?,"
UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers)
- Bordes, C. & Clerc, L. & Marimoutou, V., 2007. "Is there a structural break in equilibrium velocity in the euro area?," Working papers 165, Banque de France.
- James H. Stock & Mark W.Watson, 2003.
"Forecasting Output and Inflation: The Role of Asset Prices,"
Journal of Economic Literature,
American Economic Association, vol. 41(3), pages 788-829, September.
- James H. Stock & Mark W. Watson, 2001. "Forecasting output and inflation: the role of asset prices," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
- James H. Stock & Mark W. Watson, 2001. "Forecasting Output and Inflation: The Role of Asset Prices," NBER Working Papers 8180, National Bureau of Economic Research, Inc.
- Avouyi-Dovi, S. & Neto, D., 2004. "Equity market interdependence: the relationship between European and US stock markets," Financial Stability Review, Banque de France, issue 4, pages 108-126, June.
- Rudiger Ahrend & Pietro Catte & Robert W.R. Price, 2006. "Factors Behind Low Long-Term Interest Rates," OECD Economics Department Working Papers 490, OECD Publishing.
- Kristin J. Forbes & Roberto Rigobon, 2002.
"No Contagion, Only Interdependence: Measuring Stock Market Comovements,"
Journal of Finance,
American Finance Association, vol. 57(5), pages 2223-2261, October.
- Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
- Javier Andres & J. David López-Salido & Edward Nelson, 2004.
"Tobin's imperfect asset substitution in optimizing general equilibrium,"
2004-003, Federal Reserve Bank of St. Louis.
- Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers 4336, C.E.P.R. Discussion Papers.
- Haas, F., 2003. "Towards a “market continuum”? Structural models and interaction between credit and equity markets," Financial Stability Review, Banque de France, issue 2, pages 75-93, June.
- Avouyi-Dovi, S. & Matheron, J., 2006. "Productivity and stock prices," Financial Stability Review, Banque de France, issue 8, pages 81-94, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Christine Petit-Djemad).
If references are entirely missing, you can add them using this form.