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Asset Prices and Monetary Expansion: Evidence from CPI- and Money-Based Valuation

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  • Parker, William

Abstract

This paper examines asset valuation through the lens of monetary expansion by comparing CPI-based and money-based price normalization across equities, housing, and commodities using data from 1975 to 2025. While CPI deflation preserves the appearance of persistent trends and elevated valuations for several assets, money-based normalization produces materially different valuation inferences. Although asset prices and broad money do not exhibit a cointegrated relationship, the results are consistent with monetary expansion contributing to time-varying valuation dynamics rather than a constant long-run proportional anchor. The analysis is descriptive of historical relationships and does not imply predictive power for future price movements.

Suggested Citation

  • Parker, William, 2026. "Asset Prices and Monetary Expansion: Evidence from CPI- and Money-Based Valuation," Finance Research Letters, Elsevier, vol. 101(C).
    • Handle: RePEc:eee:finlet:v:101:y:2026:i:c:s1544612326005246
    DOI: 10.1016/j.frl.2026.109995
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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