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Monetary policy, asset prices and macroeconomic conditions : a panel-VAR study

Author

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  • Katrin Assenmacher-Wesche

    () (Swiss National Bank, Research Department)

  • Stefan Gerlach

    () (Goethe University Frankfurt, Institute for Monetary and Financial Stability)

Abstract

This paper studies the relationships between inflation, economic activity, credit, monetary policy, and residential property and equity prices in 17 OECD countries, using quarterly data for 1986-2006. Using a panel VAR, we find plausible and significant responses to a monetary policy shock. Shocks to asset prices have a positive, significant effect on GDP and credit after three to four quarters, whereas prices start to increase much later. We also consider the transmission of US shocks from the US to the other economies. While monetary policy shocks are transmitted internationally, other shocks are not, perhaps because of the form of coefficient restrictions used.

Suggested Citation

  • Katrin Assenmacher-Wesche & Stefan Gerlach, 2008. "Monetary policy, asset prices and macroeconomic conditions : a panel-VAR study," Working Paper Research 149, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:200810-24
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    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp149en.pdf
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    References listed on IDEAS

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    7. Angeloni,Ignazio & Kashyap,Anil K. & Mojon,Benoît (ed.), 2003. "Monetary Policy Transmission in the Euro Area," Cambridge Books, Cambridge University Press, number 9780521828642.
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    Cited by:

    1. Brzoza-Brzezina, Michał & Kolasa, Marcin & Makarski, Krzysztof, 2015. "A penalty function approach to occasionally binding credit constraints," Economic Modelling, Elsevier, vol. 51(C), pages 315-327.
    2. Silvestrini, Andrea & Zaghini, Andrea, 2015. "Financial shocks and the real economy in a nonlinear world: From theory to estimation," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 915-929.
    3. Gerdesmeier, Dieter & Reimers, Hans-Eggert & Roffia, Barbara, 2015. "Consumer and asset prices: Some recent evidence," Wismar Discussion Papers 01/2015, Hochschule Wismar, Wismar Business School.
    4. YUAN, Chunming & CHEN, Ruo, 2015. "Policy transmissions, external imbalances, and their impacts: Cross-country evidence from BRICS," China Economic Review, Elsevier, vol. 33(C), pages 1-24.
    5. Michael D. Bordo & John Landon-Lane, 2014. "Does Expansionary Monetary Policy Cause Asset Price Booms? Some Historical and Empirical Evidence," Central Banking, Analysis, and Economic Policies Book Series,in: Sofía Bauducco & Lawrence Christiano & Claudio Raddatz (ed.), Macroeconomic and Financial Stability: challenges for Monetary Policy, edition 1, volume 19, chapter 3, pages 61-116 Central Bank of Chile.
    6. Jannsen, Nils & Potjagailo, Galina & Wolters, Maik H., 2015. "Monetary policy during financial crises: Is the transmission mechanism impaired?," Kiel Working Papers 2005, Kiel Institute for the World Economy (IfW).
    7. Tillmann, Peter, 2013. "Capital inflows and asset prices: Evidence from emerging Asia," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 717-729.
    8. Michael D. Bordo & John Landon-Lane, 2014. "What Explains House Price Booms? History and Empirical Evidence," International Symposia in Economic Theory and Econometrics,in: Macroeconomic Analysis and International Finance, volume 23, pages 1-36 Emerald Publishing Ltd.
    9. Andrea Tafuro, 2015. " The Effects of Fiscal Policy on Employment: an Analysis of the Aggregate Evidence," Working Papers 2015: 03, Department of Economics, University of Venice "Ca' Foscari".
    10. Adebayo Augustine Kutu & Harold Ngalawa, 2016. "Monetary Policy Shocks And Industrial Output In Brics Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(3), pages 3-24, July-Sept.
    11. Adam S. Posen, 2011. "Monetary Policy, Bubbles, and the Knowledge Problem," Cato Journal, Cato Journal, Cato Institute, vol. 31(3), pages 461-471, Fall.
    12. Hail Park & Yongcheol Shin, 2014. "Mapping Korea's International Linkages using Generalised Connectedness Measures," Working Papers 2014-16, Economic Research Institute, Bank of Korea.
    13. Nady Rapelanoro, 2016. "Spillover effects of global liquiditys expansion on emerging countries: evidences from a Panel VAR approach," EconomiX Working Papers 2016-17, University of Paris Nanterre, EconomiX.
    14. Dirk Drechsel & Anne Kathrin Funk, 2017. "Time-Varying and Regional Dynamics in Swiss Housing Markets," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 153(I), pages 37-72, March.
    15. repec:iez:survey:ces-v19_1-2017_palic-posedelsimovic-vizek is not listed on IDEAS
    16. Jim Harper, 2011. "Book Review: America Identified: Biometric Technology and Society," Cato Journal, Cato Journal, Cato Institute, vol. 31(3), pages 672-674, Fall.
    17. repec:eee:ememar:v:31:y:2017:i:c:p:176-192 is not listed on IDEAS
    18. Łukasz Goczek & Karol Partyka, 2016. "Reakcja polityki pieniężnej na wydarzenia giełdowe," Gospodarka Narodowa, Warsaw School of Economics, issue 5, pages 27-50.
    19. Charles Rahal,, 2016. "Housing markets and unconventional monetary policy," Journal of Housing Economics, Elsevier, vol. 32(C), pages 67-80.
    20. Gert Peersman, 2012. "Effectiveness of Unconventional Monetary Policy at the Zero Lower Bound," 2012 Meeting Papers 400, Society for Economic Dynamics.
    21. Allen, Franklin & Rogoff, Kenneth, 2011. "Asset Prices, Financial Stability and Monetary Policy," Working Papers 11-39, University of Pennsylvania, Wharton School, Weiss Center.

    More about this item

    Keywords

    asset prices; credit; monetary policy; panel VAR;

    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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