Can Excess Liquidity Signal an Asset Price Boom?
This paper analyses the relationship between the prevailing liquidity conditions (such as measures of money, credit and interest rates) and developments in asset prices from a monetary analysis perspective. After having identified periods of sustained excess liquidity, we analyse under which conditions they are more likely to be followed by an asset price boom. The results from a descriptive analysis of the developments in a number of macroeconomic and financial variables suggest that periods of sustained excess liquidity that are accompanied by strong economic activity, low interest rates, high real credit growth and low inflation have a higher likelihood of being followed by an asset price boom. This conclusion is also confirmed by a logit analysis.
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- DETKEN Carsten & SMETS Frank, "undated".
"Asset Price Booms and Monetary Policy,"
- Detken, Carsten & Smets, Frank, 2004. "Asset price booms and monetary policy," Working Paper Series 364, European Central Bank.
- Claudio E. V. Borio & Philip Lowe, 2004. "Securing sustainable price stability: should credit come back from the wilderness?," BIS Working Papers 157, Bank for International Settlements.
- Gouteron, S. & Szpiro, D., 2005. "Excès de liquidité monétaire et prix des actifs," Working papers 131, Banque de France.
- Detken, Carsten & Adalid, Ramón, 2007. "Liquidity shocks and asset price boom/bust cycles," Working Paper Series 732, European Central Bank.
- William R. White, 2006. "Is price stability enough?," BIS Working Papers 205, Bank for International Settlements. Full references (including those not matched with items on IDEAS)
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