Asset Prices, Monetary Policy, and Aggregate Fluctuations: An Empirical Investigation
This paper studies empirically the dynamic interactions between asset prices, monetary policy, and aggregate fluctuations during the Volcker-Greenspan period. Using a simple structural vector autoregression framework, we investigate the effects of monetary policy on output, inflation and asset prices, the interactions of asset prices with the aggregate economy, as well as the relationship between stock price and house price. Several robust findings emerge. The systematic response of monetary policy to output and inflation is also found to play an important role in stabilizing the aggregate economy. In addition, the results call for special attention to be paid to house price when studying the dynamic relationships between asset prices and macroeconomic fluctuations.
|Date of creation:||Jun 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.buseco.monash.edu.au/eco/
More information through EDIRC
|Order Information:|| Web: http://www.buseco.monash.edu.au/eco/research/papers/ Email: |
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.:
- Matteo Iacoviello, 2005.
"House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle,"
American Economic Review,
American Economic Association, vol. 95(3), pages 739-764, June.
- Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
- Eric M. Leeper & Tao Zha, 2002.
"Modest policy interventions,"
2002-19, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 2003. "Modest policy interventions," Working Paper 2003-24, Federal Reserve Bank of Atlanta.
- Eric M. Leeper & Tao Zha, 2002. "Modest Policy Interventions," NBER Working Papers 9192, National Bureau of Economic Research, Inc.
- Eric M. Leeper & Tao Zha, 1999. "Modest policy interventions," Working Paper 99-22, Federal Reserve Bank of Atlanta.
- Sims, Christopher A., 1992.
"Interpreting the macroeconomic time series facts : The effects of monetary policy,"
European Economic Review,
Elsevier, vol. 36(5), pages 975-1000, June.
- Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
- Jin, Yi & Zeng, Zhixiong, 2004. "Residential investment and house prices in a multi-sector monetary business cycle model," Journal of Housing Economics, Elsevier, vol. 13(4), pages 268-286, December.
- Q. Farook Akram & Gunnar Bårdsen & Øyvind Eitrheim, 2005.
"Monetary policy and asset prices: To respond or not?,"
2005/9, Norges Bank.
- Q. Farooq Akram & Gunnar Bärdsen & Øyvind Eitrheim, 2006. "Monetary policy and asset prices: to respond or not?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 279-292.
- Gunnar Bårdsen & Q. Farooq Akram & Øyvind Eitrheim, 2005. "Monetary policy and asset prices: To respond or not?," Working Paper Series 5405, Department of Economics, Norwegian University of Science and Technology.
- Charles Ka Yui Leung, 2004.
"Macroeconomics and Housing: A Review of the Literature,"
00004, Chinese University of Hong Kong, Department of Economics.
- Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
- Charles Ka-Yui Leung, 2004. "Macroeconomics and Housing: A Review of the Literature," Departmental Working Papers _164, Chinese University of Hong Kong, Department of Economics.
- Patelis, Alex D, 1997. " Stock Return Predictability and the Role of Monetary Policy," Journal of Finance, American Finance Association, vol. 52(5), pages 1951-72, December.
- Michael DeStefano, 2004. "Stock Returns and the Business Cycle," The Financial Review, Eastern Finance Association, vol. 39(4), pages 527-547, November.
- Alexandros Kontonikas & Alberto Montagnoli, 2004.
"Has Monetary Policy Reacted to Asset Price Movements? Evidence from the UK,"
Cyprus Economic Society and University of Cyprus, vol. 7(1), pages 18-33, Summer.
- A. Kontonikas & A. Montagnoli, 2002. "Has Monetary Policy Reacted To Asset Price Movements: Evidence From The Uk," Public Policy Discussion Papers 02-11, Economics and Finance Section, School of Social Sciences, Brunel University.
- A. Kontonikas & A. Montagnoli, 2002. "Has Monetary Policy Reacted To Asset Price Movements: Evidence From The Uk," Economics and Finance Discussion Papers 02-11, Economics and Finance Section, School of Social Sciences, Brunel University.
- Del Negro, Marco & Otrok, Christopher, 2007. "99 Luftballons: Monetary policy and the house price boom across U.S. states," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1962-1985, October.
- Stephen G. Cecchetti, 2009. "Crisis and Responses: The Federal Reserve in the Early Stages of the Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 51-75, Winter.
- Willem Thorbecke, 1995.
"On Stock Market Returns and Monetary Policy,"
Economics Working Paper Archive
wp_139, Levy Economics Institute.
- Semmler, Willi & Zhang, Wenlang, 2007. "Asset price volatility and monetary policy rules: A dynamic model and empirical evidence," Economic Modelling, Elsevier, vol. 24(3), pages 411-430, May.
- Nan-Kuang Chen & Charles Leung, 2008. "Asset Price Spillover, Collateral and Crises: with an Application to Property Market Policy," The Journal of Real Estate Finance and Economics, Springer, vol. 37(4), pages 351-385, November.
- Iacoviello, Matteo & Minetti, Raoul, 2008.
"The credit channel of monetary policy: Evidence from the housing market,"
Journal of Macroeconomics,
Elsevier, vol. 30(1), pages 69-96, March.
- Matteo Iacoviello & Raoul Minetti, 2002. "The Credit Channel of Monetary Policy: Evidence from the Housing Market," Boston College Working Papers in Economics 541, Boston College Department of Economics, revised 29 Aug 2003.
- Fama, Eugene F. & French, Kenneth R., 1989. "Business conditions and expected returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 25(1), pages 23-49, November.
- Matteo Iacoviello & Raoul Minetti, 2002.
"Financial Liberalisation and the Sensitivity of House Prices to Monetary Policy: Theory and Evidence,"
Boston College Working Papers in Economics
538, Boston College Department of Economics.
- Matteo Iacoviello & Raoul Minetti, 2003. "Financial Liberalization And The Sensitivity Of House Prices To Monetary Policy: Theory And Evidence," Manchester School, University of Manchester, vol. 71(1), pages 20-34, January.
- 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.
- Michael D. Bordo & Michael J. Dueker & David C. Wheelock, 2007. "Monetary policy and stock market booms and busts in the 20th century," Working Papers 2007-020, Federal Reserve Bank of St. Louis.
- William D. Lastrapes, 1998. "The Dynamic Effects Of Money: Combining Short-Run And Long-Run Identifying Restrictions Using Bayesian Techniques," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 588-599, November.
When requesting a correction, please mention this item's handle: RePEc:mos:moswps:2011-13. 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: (Simon Angus)
If references are entirely missing, you can add them using this form.