Measuring Monetary Conditions in US Asset Markets - A Market Specific Approach
AbstractWe analyze monetary conditions in US asset markets — corporate equity, real estate, Treasury bond and corporate & foreign bond — from a market specific perspective, proposing the concept of market leverage. Market leverage measures the average leverage of all asset holders in a particular asset market. The concept builds on an accounting based network that links balance sheet leverages of asset holders to their corresponding shares of ownership. Our empirical analysis yields the following results. Firstly, market specific monetary conditions can differ considerably among asset markets. Secondly, market specific monetary conditions are positively related to asset prices. Thirdly, US asset markets have experienced a loosening in market specific monetary conditions in the last decades. Fourthly, the loosening of market specific monetary conditions explains long-term increases in US asset prices. Fifthly, the recent convergence of market specific monetary conditions of real asset markets towards those of financial asset markets implies a rise in upside risk to future US asset price inflation.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27384.
Date of creation: Nov 2010
Date of revision:
market leverage; monetary conditions; asset prices;
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-23 (All new papers)
- NEP-CBA-2010-12-23 (Central Banking)
- NEP-MON-2010-12-23 (Monetary Economics)
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