Work detail

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

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