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The impact of changes in asset prices on real economic activity : a cointegration analysis for Germany

Author

Listed:
  • Andreas Nastansky
  • Hans Gerhard Strohe

Abstract

This paper reviews theoretical and empirical evidence of asset price movements impact on the real economic activity. A key channel is the wealth effect on consumption. Fluctuations in stock prices and housing prices influence the households wealth and could have important impacts on households consumption. In addition, stock prices may affect corporate sector investments and property prices may affect building activity. Here, the method of cointegration is used to estimate the wealth effect and the investment effect in aggregate time series for Germany after the Reunification in 1990. Moreover, we discuss the role of asset prices in the monetary policy strategy of the ECB.

Suggested Citation

  • Andreas Nastansky & Hans Gerhard Strohe, 2010. "The impact of changes in asset prices on real economic activity : a cointegration analysis for Germany," Statistische Diskussionsbeiträge 38, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
  • Handle: RePEc:pot:statdp:38
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    File URL: http://nbn-resolving.de/urn:nbn:de:kobv:517-opus-43762
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    Keywords

    Stock Prices; Property Prices; Consumption; Investment; Central Banking Policy;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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