Liquidity and the dynamic pattern of asset price adjustment: A global view

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. At the same time, however, asset prices have increased sharply, significantly outpacing the subdued development in consumer prices. We investigate the interactions between money and goods and asset prices at the global level. Using aggregated data for major OECD countries, our VAR results support the view that different price elasticities on asset and goods markets explain the observed relative price change between asset classes and consumer goods. Terms of use: Documents in JEL-Code: E31, E52, F01, F42

Sowing the seeds for the subprime crisis: does global liquidity matter for housing and other asset prices?

“…In our view, one important reason for these quite unbalanced findings is the wide array of different price 14 Note the striking similarity in the impulse responses of a liquidity shock to output and to commodity prices. 15 The results of the robustness checks are available on request or can be found in Belke et al (2008). A non-technical variant of this paper will be forthcoming in the Journal of Financial Transformation.…”

US monetary policy and sectoral commodity prices

“…Using a standard VAR, Christiano et al (2005) find a similar result and argue that the inclusion of the aggregate commodity price in the system of endogenous variables helps tackle the price puzzle. Barsky and Kilian (2004) and commodity and goods prices (Belke et al, 2010b;Belke et al, 2014). In this context, global liquidity is viewed as an extension of domestic-level liquidity measures for the G-7 countries and is typically identified via quantitative measures, such as domestic credit scaled by GDP (Gouteron and Szpiro, 2005), broad and narrow monetary aggregates (Baks and Kramer, 1999), excess reserve money created by central banks (Artus and Virard, 2010;Jawadi et al, 2014a), and foreign exchange reserves (De Nicolo and Wiegand, 2007;Darius and Radde, 2010).…”

“…The authors find that excess liquidity at global level has spillover effects on output and price levels, but the impact on real estate, commodity and share prices is less clear. Similarly, Belke et al (2010b) show that while monetary aggregates in OECD countries provide leading information on property prices and gold prices, shocks to liquidity do not seem to have impacts on equity prices.…”

“…The expansions in global liquidity and the falls in interest rates have been dynamic since 2001 and are a result of increased activity in the carry trade that moved liquidity from the United States to emerging markets and expanded investments in several asset classes including stocks, real estate and commodities (Hammoudeh and Yuan, 2008;Batten et al, 2010;Belke et al, 2010b;Brana et al, 2012;Frankel, 2013;Vespignani, 2013, 2015;Belke et al, 2014). The impact on commodity prices has however been heterogeneous.…”

Securitization and the balance sheet channel of monetary transmission

“…There are, however, a large number of studies (e.g. Rigobon and Sack, 2004;Belke et al, 2010) that justify our assumption. These studies identify the exogenous component of policy decisions and find a negative relationship between the policy rate and the price of assets such as asset-backed securities.…”