Asset Price Misalignments and the Role of Money and Credit
By Dieter Gerdesmeier, Hans-Eggert Reimers, Barbara Roffia. Social Science Research Network, 2010
168 citations recorded by the source corpus.
This paper contributes to the literature on the properties of money and credit indicators for detecting asset price misalignments. After a review of the evidence in the literature on this issue, the paper discusses the approaches that can be considered to detect asset price busts. Considering a sample of 17 OECD industrialised countries and the euro area over the period 1969 Q1 - 2008 Q3, we construct an asset price composite indicator which incorporates developments in both the stock price and house price markets and propose a criterion to identify the periods characterised by asset price busts, which has been applied in the currency crisis literature. The empirical analysis is based on a pooled probit-type approach with several macroeconomic monetary, financial and real variables. According to statistical tests, credit aggregates (either in terms of annual changes or growth gap), changes in nominal long-term interest rates and investment-to-GDP ratio combined with either house prices or stock prices dynamics turn out to be the best indicators which help to forecast asset price busts up to 8 quarters ahead. JEL Classification: E37, E44, E51
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/b604bff220ff9f42b5723e10af006ce47a7a5936
Citations in the corpus
- Macroprudential Policy - A Literature Review (2012, unknown): “Martinez Garcia (2008), Gertler and Karadi (2011) and Gertler and Kiyotaki (2010).”
- FISCAL POLICY AND ASSET PRICES (2013, unknown): “For instance, Granville and Mallick (2009) show that monetary stability (characterized by inflation targeting) is conducive to financial stability (proxied by a wide range of variables including the deposit–loan ratio of the banking sector, exchange rates, housing price inflation, the term structure”
- The Global Financial Crisis: Causes and Cures (2009, unknown): “Kindleberger and Aliber (2005) emphasize the role of the growing mass of financial assets accumulated by surplus countries in leading to a sequence of booms and busts across the world over the past three decades.”