Advanced Search
MyIDEAS: Login to save this paper or follow this series

Asset Price Shocks, Real Expenditures, and Financial Structure:A Multi-Country Analysis

Contents:

Author Info

  • Chirinko, Robert S.
  • Haan, Leo de
  • Sterken, Elmer

    (Groningen University)

Abstract

This paper examines the response of the economies of 11 EU countries, Japan, and the United States to shocks in housing and equity prices. The effects are assessed with a Structural Vector Auto Regressive (SVAR) model, and four key findings emerge. First, the impacts of asset price shocks are heterogeneous across countries. Second, these heterogeneous responses are systematically related to cross-country variation in financial structure, and we are thus able to document the importance of a wealth/balance sheet channel for consumption and an equity finance channel for investment. Third, for a given country, housing shocks have a much greater impact than equity shocks. Fourth, variance decompositions indicate that monetary policy reacts to equity price shocks but not to housing price shocks. These results highlight the important role played by asset prices on real activity, and fuel the debate about the inclusion of asset prices in the formulation of monetary policy.

Download Info

If 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.
File URL: http://irs.ub.rug.nl/ppn/294542108
Download Restriction: no

Bibliographic Info

Paper provided by University of Groningen, CCSO Centre for Economic Research in its series CCSO Working Papers with number 200411.

as in new window
Length:
Date of creation: 2004
Date of revision:
Handle: RePEc:dgr:rugccs:200411

Contact details of provider:
Postal: PO Box 800, 9700 AV Groningen
Phone: +31 50 363 7185
Fax: +31 50 363 3720
Email:
Web page: http://ccso.eldoc.ub.rug.nl/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Ben Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 77-128.
  2. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
  3. Karl E. Case & John M. Quigley & Robert J. Shiller, 2001. "Comparing Wealth Effects: The Stock Market versus the Housing Market," Cowles Foundation Discussion Papers 1335, Cowles Foundation for Research in Economics, Yale University.
  4. Sydney Ludvigson & Charles Steindel & Martin Lettau, 2002. "Monetary policy transmission through the consumption-wealth channel," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 117-133.
  5. Marco Becht & Fabrizio Barca, 2001. "The control of corporate Europe," ULB Institutional Repository 2013/13302, ULB -- Universite Libre de Bruxelles.
  6. Stein, Jeremy C., 1996. "Rational Capital Budgeting in an Irrational World," Scholarly Articles 3708373, Harvard University Department of Economics.
  7. Massimo Giuliodori, 2005. "The Role Of House Prices In The Monetary Transmission Mechanism Across European Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 519-543, 09.
  8. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  9. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," International Finance Discussion Papers 462, Board of Governors of the Federal Reserve System (U.S.).
  10. William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
  11. Iacoviello, Matteo, 2000. "House prices and the macroeconomy in Europe: Results from a structural var analysis," Working Paper Series 0018, European Central Bank.
  12. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
  13. Richard Clarida & Mark Gertler, 1996. "How the Bundesbank Conducts Monetary Policy," NBER Working Papers 5581, National Bureau of Economic Research, Inc.
  14. Olivier Blanchard & Changyong Rhee & Lawrence Summers, 1990. "The Stock Market, Profit and Investment," NBER Working Papers 3370, National Bureau of Economic Research, Inc.
  15. Paul De Grauwe & Marc-Alexandre Sénégas, 2003. "Monetary Policy in EMU when the Transmission is Asymmetric and Uncertain," CESifo Working Paper Series 891, CESifo Group Munich.
  16. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 0114, European Central Bank.
  17. R. Glenn Hubbard, 1998. "Capital-Market Imperfections and Investment," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 193-225, March.
  18. Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
  19. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
  20. Gert Peersman, 2004. "The Transmission of Monetary Policy in the Euro Area: Are the Effects Different Across Countries?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(3), pages 285-308, 07.
  21. Claudio E. V. Borio & Philip Lowe, 2004. "Securing sustainable price stability: should credit come back from the wilderness?," BIS Working Papers 157, Bank for International Settlements.
  22. Bill Dupor & Timothy Conley, 2004. "The Fed Response to Equity Prices and Inflation," American Economic Review, American Economic Association, vol. 94(2), pages 24-28, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Paolo Guarda & Philippe Jeanfils, 2012. "Macro-financial linkages: Evidence from country-specific VARs," BCL working papers 71, Central Bank of Luxembourg.
  2. Beltratti, Andrea & Morana, Claudio, 2010. "International house prices and macroeconomic fluctuations," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 533-545, March.
  3. Vansteenkiste, Isabel, 2007. "Regional housing market spillovers in the US: lessons from regional divergences in a common monetary policy setting," Working Paper Series 0708, European Central Bank.
  4. Fabio C. Bagliano & Claudio Morana, 2012. "Macro-Finance Interactions in the US: A Global Perspective," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum.
  5. Ricardo M. Sousa & António Afonso, 2008. "The Macroeconomic Effects of Fiscal Policy," NIPE Working Papers 22/2008, NIPE - Universidade do Minho.
  6. Marco Del Negro & Christopher Otrok, 2005. "Monetary policy and the house price boom across U.S. states," Working Paper 2005-24, Federal Reserve Bank of Atlanta.
  7. Fabio C. Bagliano & Claudio Morana, 2010. "The Great Recession: US dynamics and spillovers to the world economy," Working papers 17, Former Department of Economics and Public Finance "G. Prato", University of Torino.
  8. Vítor Castro & Ricardo M. Sousa, 2010. "How Do Central Banks React to Wealth Composition and Asset Prices?," NIPE Working Papers 26/2010, NIPE - Universidade do Minho.
  9. Andrea Beltratti & Claudio Morana, 2008. "International shocks and national house prices," ICER Working Papers - Applied Mathematics Series 14-2008, ICER - International Centre for Economic Research.
  10. Elmer Sterken, 2006. "Competition in the Dutch Mortgage Market," De Economist, Springer, vol. 154(4), pages 587-600, December.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dgr:rugccs:200411. See general 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: (Joke Bulthuis).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.