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Liquidity, inflation and asset prices in a time-varying framework for the euro area

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Author Info

  • Christiane Baumeister

    ()
    (Ghent University)

  • Eveline Durinck

    ()
    (Ghent University)

  • Gert Peersman

    ()
    (Ghent University)

Abstract

In this paper, we investigate how the dynamic effects of excess liquidity shocks on economic activity, asset prices and inflation differ over time. We show that the impact varies considerably over time, depends on the source of increased liquidity (M1, M3-M1 or credit) and the underlying state of the economy (asset price boom-bust, business cycle, inflation cycle, credit cycle and monetary policy stance).

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File URL: http://www.nbb.be/doc/oc/repec/reswpp/wp142En.pdf
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Bibliographic Info

Paper provided by National Bank of Belgium in its series Working Paper Research with number 142.

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Length: 55 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:nbb:reswpp:200810-17

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Keywords: Liquidity; asset prices; inflation; time-varying coefficients;

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Cited by:
  1. Nakajima, Jouchi & Kasuya, Munehisa & Watanabe, Toshiaki, 2011. "Bayesian analysis of time-varying parameter vector autoregressive model for the Japanese economy and monetary policy," Journal of the Japanese and International Economies, Elsevier, vol. 25(3), pages 225-245, September.
  2. Matteo Barigozzi & Antonio Conti, 2010. "On the Sources of Euro Area Money Demand Stability. A Time-Varying Cointegration Analysis," Working Papers ECARES ECARES 2010-022, ULB -- Universite Libre de Bruxelles.
  3. Guarda, Paolo & Jeanfils, Philippe, 2012. "Macro-Financial Linkages: evidence from country-specific VARs," CEPR Discussion Papers 8875, C.E.P.R. Discussion Papers.
  4. Koop, Gary & Tole, Lise, 2013. "Modeling the relationship between European carbon permits and certified emission reductions," Journal of Empirical Finance, Elsevier, vol. 24(C), pages 166-181.
  5. Goodness C. Aye & Rangan Gupta & Mampho P. Modise, 2012. "Do Stock Prices Impact Consumption and Interest Rate in South Africa? Evidence from a Time-Varying Vector Autoregressive Model," Working Papers 201224, University of Pretoria, Department of Economics.

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