Can Monetary Policy Create Asset Price Bubbles?
| Author: | Mgr. Jan Mareček |
|---|---|
| Year: | 2014 - summer |
| Leaders: | prof. Roman Horváth Ph.D. |
| Consultants: | |
| Work type: | Finance, Financial Markets and Banking Masters |
| Language: | English |
| Pages: | 92 |
| Awards and prizes: | |
| Link: | https://is.cuni.cz/webapps/zzp/detail/133349/ |
| Abstract: | The objective of the thesis is to find out whether expansionary monetary policy creates an upward pressure on asset prices and can thus create asset price bubbles, or more precisely significantly contribute to their creation. In doing so, we test the significance and the sign of coefficient on monetary policy stance indicator as a determinant of real estate and stock prices on 19 OECD countries quarterly panel data since 1980. Further we assess periods of real estate and stock price bubbles and periods of expansionary monetary policy and examine their relationship. The asset price bubbles are ass essed on the basis of relevant price ind ices developments without examining the underlying fundamentals. Based on our results it appears that expansionary monetary policy has a positive effect on real estate prices and can thus contribute to formation of r eal estate bubbles. The effect on stock prices is ambiguous and mostly statistically insignificant. By examining the relationship between assessed asset price bubbles and periods of expansionary monetary policy we found out that monetary expansion is neith er sufficient nor necessary condition for formation of asset price bubbles but also that there is a relatively strong relationship between these events |
