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Asset Price Volatility a Catalyst to Weakness in the Real Economy

Author

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  • Victor, Xing

Abstract

Executive Summary: • Many economists expect poor data to precede financial market weakness under the framework that buoyant asset markets reflect economic strength, and benign indicators would imply a rise in volatility is far from imminent • Rising financialization has amplified the impact of non-bank financing on the real economy, for yield-seeking institutional investors depressed risk-free returns and “moved up the ladder” in duration, credit and liquidity risks • As monetary authorities turn to quantitative tightening, heightened asset price volatility would threaten entities reliant on non-bank financing, thus turning weakness in asset markets into a constraint on real economic activities

Suggested Citation

  • Victor, Xing, 2017. "Asset Price Volatility a Catalyst to Weakness in the Real Economy," MPRA Paper 84470, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:84470
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    File URL: https://mpra.ub.uni-muenchen.de/84470/1/MPRA_paper_84453.pdf
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    More about this item

    Keywords

    Volatility; non-bank financing; contagion risk; spill-over impact;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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