IDEAS home Printed from
   My bibliography  Save this paper

Understanding Asset Prices: Determinants and Policy Implications


  • Clerc, L.


The paper provides an overview of recent asset price developments in France in the light of analytical research carried out at the Banque de France. Like in many other countries, historically low interest rates have boosted asset price dynamics in France over recent years. The paper attempts to shed light on the main driving factors and assesses, in particular, the role played by "excess liquidity" in shaping current developments. Additional factors related to fierce competition in the French banking sector have also contributed to the upswing in residential property prices, exacerbating households' demand through credit expansion and leading to a sharp and unprecedented increase in household debt, consistent with a financial-accelerator-like mechanism. On several occasions over the past two years, the Banque de France has expressed its concerns about lending for housing purchase and housing price developments, both from a monetary and a financial stability perspective. Finally, the paper presents some views, based on in-house research, on the role, if any, that asset prices could play in the setting of monetary policy.

Suggested Citation

  • Clerc, L., 2007. "Understanding Asset Prices: Determinants and Policy Implications," Working papers 168, Banque de France.
  • Handle: RePEc:bfr:banfra:168

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Bordes, C. & Clerc, L. & Marimoutou, V., 2007. "Is there a structural break in equilibrium velocity in the euro area?," Working papers 165, Banque de France.
    2. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
    3. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
    4. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
    5. Avouyi-Dovi, S. & Matheron, J., 2006. "Productivity and stock prices," Financial Stability Review, Banque de France, issue 8, pages 81-94, May.
    6. Haas, F., 2003. "Towards a “market continuum”? Structural models and interaction between credit and equity markets," Financial Stability Review, Banque de France, issue 2, pages 75-93, June.
    7. Avouyi-Dovi, S. & Neto, D., 2004. "Equity market interdependence: the relationship between European and US stock markets," Financial Stability Review, Banque de France, issue 4, pages 108-126, June.
    8. Aymeric de Loubens & Caroline Jardet & Julien Idier, 2008. "Les déterminants des taux d’intérêt à long terme aux États-Unis et dans la zone euro : une approche multivariée," Économie et Prévision, Programme National Persée, vol. 185(4), pages 13-32.
    9. Lecat, R. & Mésonnier, J-S., 2005. "Dynamique des prix des logements : quel rôle des facteurs financiers ?," Bulletin de la Banque de France, Banque de France, issue 133, pages 29-47.
    10. Andrés, Javier & López-Salido, J David & Nelson, Edward, 2004. "Tobin's Imperfect Asset Substitution in Optimizing General Equilibrium," CEPR Discussion Papers 4336, C.E.P.R. Discussion Papers.
    11. Grouard, M H. & Lévy, S. & Lubochinsky, C., 2003. "Stock market volatility: from empirical data to their interpretation," Financial Stability Review, Banque de France, issue 2, pages 57-74, June.
    12. Rudiger Ahrend & Pietro Catte & Robert W. R. Price, 2006. "Factors Behind Low Long-Term Interest Rates," OECD Economics Department Working Papers 490, OECD Publishing.
    13. Idier, J., 2006. "Stock exchanges industry consolidation and shock transmission," Working papers 159, Banque de France.
    Full references (including those not matched with items on IDEAS)


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

    Cited by:

    1. Marie-Louise Djigbenou, 2014. "Determinants of Global Liquidity Dynamics:a FAVAR approach," Working Papers hal-00956314, HAL.

    More about this item


    Asset prices ; Monetary policy.;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:168. 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: (Michael brassart). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.