Liquidity and asset prices: a VECM approach
AbstractThe recent financial and economic crisis highlighted the importance to better understand the relationship between liquidity developments and asset price movements. Central banks with focus on inflation targeting allowed asset price inflation, following burst, with its devastating consequences for the financial system and real economy. Equilibrium price should emanate from fundamentals. However liquidity conditions are part of fundamental variables and should be taken into consideration as explanatory variables in the process of asset pricing. Furthermore in many cases assets serve as collateral in refinancing which means that refinancing conditions influence values of pledged assets.
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 University Library of Munich, Germany in its series MPRA Paper with number 40331.
Date of creation: 2012
Date of revision:
liquidity; asset pricing; broker dealer; repo; error correction;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
- NEP-MAC-2012-08-23 (Macroeconomics)
- NEP-MON-2012-08-23 (Monetary Economics)
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.:
- Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
- Tobias Adrian & Hyun Song Shin, 2008. "Liquidity, monetary policy, and financial cycles," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 14(Jan).
- Detken, Carsten & Smets, Frank, 2004. "Asset price booms and monetary policy," Working Paper Series 0364, European Central Bank.
- Klaas Baks & Charles Frederick Kramer, 1999. "Global Liquidity and Asset Prices," IMF Working Papers 99/168, International Monetary Fund.
- Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and financial cycles," BIS Working Papers 256, Bank for International Settlements.
- Drehmann, Mathias & Nikolaou, Kleopatra, 2009.
"Funding liquidity risk: definition and measurement,"
Working Paper Series
1024, European Central Bank.
- Mathias Drehmann & Kleopatra Nikolaou, 2010. "Funding liquidity risk: definition and measurement," BIS Working Papers 316, Bank for International Settlements.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.