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Financial Structure and the Impact of Monetary Policy on Asset Prices

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Listed:
  • Katrin Assenmacher-Wesche

    (Swiss National Bank)

  • Stefan Gerlach

    (IMFS, Goethe University Frankfurt, and CFS)

Abstract

We study the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006, using single-country VARs and panel VARs in which we distinguish between groups of countries depending on their financial systems. The effect of monetary policy on property prices is about three times as large as its impact on GDP. Using monetary policy to guard against financial instability by offsetting asset-price movements thus has sizable effects on economic activity. While the financial structure influences the impact of policy on asset prices, its importance appears limited

Suggested Citation

  • Katrin Assenmacher-Wesche & Stefan Gerlach, 2008. "Financial Structure and the Impact of Monetary Policy on Asset Prices," CFS Working Paper Series 2008/30, Center for Financial Studies.
  • Handle: RePEc:cfs:cfswop:wp200830
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    More about this item

    Keywords

    Asset Prices; Monetary Policy; Panel VARComplementarity; Exchange Rate Pass-Through;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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