IDEAS home Printed from https://ideas.repec.org/a/nbb/ecrart/y2005mseptemberiiiip65-78.html
   My bibliography  Save this article

Share prices, house prices and monetary policy

Author

Listed:
  • A. Bruggeman

    (National Bank of Belgium, Research Department)

  • M. Hradisky

    (National Bank of Belgium, Research Department)

  • V. Périlleux

    (National Bank of Belgium, Research Department)

Abstract

Recent developments in stock and house prices revived the debate on the role of asset prices in the conduct of monetary policy. The article first explores the links between asset price fluctuations, macroeconomic developments and monetary policy, highlighting the possibility of asset price booms and bursts in an environment of stable consumer prices and the challenges for monetary policy. The problem of identification of “bubbles” is then illustrated by an assessment of recent developments in stock prices in the United States and the euro area and in house prices in the euro area, with special attention for the fast-increasing house prices in some countries and for the Belgian situation. Finally, the article briefly explains how asset prices are taken into account in the monetary policy strategy of the Eurosystem.

Suggested Citation

  • A. Bruggeman & M. Hradisky & V. Périlleux, 2005. "Share prices, house prices and monetary policy," Economic Review, National Bank of Belgium, issue iii, pages 65-78, September.
    • Handle: RePEc:nbb:ecrart:y:2005:m:september:i:iii:p:65-78
    as

    Download full text from publisher

    File URL: https://www.nbb.be/en/articles/share-prices-house-prices-and-monetary-policy
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Detken, Carsten & Smets, Frank, 2004. "Asset price booms and monetary policy," Working Paper Series 364, European Central Bank.
    2. Patrick BISCIARI & Alain DURRE & Alain NYSSENS, 2003. "Stock Market Valuation In The United States," Finance 0312011, University Library of Munich, Germany.
    3. Juan Ayuso & Fernando Restoy, 2003. "House prices and rents: an equilibrium asset pricing approach," Working Papers 0304, Banco de España.
    4. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    5. Michael D. Bordo & David C. Wheelock, 2004. "Monetary policy and asset prices: a look back at past U.S. stock market booms," Review, Federal Reserve Bank of St. Louis, vol. 86(Nov), pages 19-44.
    6. Stiglitz, Joseph E, 1990. "Symposium on Bubbles," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 13-18, Spring.
    7. Michael D. Bordo & Olivier Jeanne, 2002. "Monetary Policy and Asset Prices: Does ‘Benign Neglect’ Make Sense?," International Finance, Wiley Blackwell, vol. 5(2), pages 139-164.
    8. Myron J. Gordon & Eli Shapiro, 1956. "Capital Equipment Analysis: The Required Rate of Profit," Management Science, INFORMS, vol. 3(1), pages 102-110, October.
    9. Frederic S. Mishkin, 2001. "The Transmission Mechanism and the Role of Asset Prices in Monetary Policy," NBER Working Papers 8617, National Bureau of Economic Research, Inc.
    10. Ellen R. McGrattan & Edward C. Prescott, 2004. "The 1929 Stock Market: Irving Fisher Was Right," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 991-1009, November.
    11. Kieran McQuinn & Nuala O’Donnell & Mary Ryan, 2005. "Central Bank and Financial Services Authority of Ireland's model," Chapters, in: Gabriel Fagan & Julian Morgan (ed.), Econometric Models of the Euro-area Central Banks, chapter 11, Edward Elgar Publishing.
    12. Jorge Martínez Pagés & Luis Ángel Maza, 2003. "Analysis of house prices in Spain," Working Papers 0307, Banco de España.
    13. Quentin Wibaut, 2000. "Politique monétaire et prix des actifs: le cas des Etats-Unis," Working Paper Document 11, National Bank of Belgium.
    14. repec:bla:intfin:v:5:y:2002:i:2:p:139-64 is not listed on IDEAS
    15. Bruno Eugène & Philippe Jeanfils & Benoît Robert, 2003. "La consommation privée en Belgique," Working Paper Document 39, National Bank of Belgium.
    16. Pietro Catte & Nathalie Girouard & Robert Price & Christophe André, 2005. "The Contribution of Housing Markets to Cyclical Resilience," OECD Economic Studies, OECD Publishing, vol. 2004(1), pages 125-156.
    17. Juan Ayuso & Jorge Martínez & Luis A. Maza & Fernando Restoy, 2003. "House prices in Spain," Economic Bulletin, Banco de España, issue OCT, pages 69-74, October.
    18. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ioanna Kokores, 2015. "Lean-Against-the-Wind Monetary Policy: The Post-Crisis Shift in the Literature," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 66-99, july-Dece.
    2. Juhro, Solikin M. & Iyke, Bernard Njindan & Narayan, Paresh Kumar, 2021. "Interdependence between monetary policy and asset prices in ASEAN-5 countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    3. Michael Berlemann & Julia Freese, 2013. "Monetary policy and real estate prices: a disaggregated analysis for Switzerland," International Economics and Economic Policy, Springer, vol. 10(4), pages 469-490, December.
    4. Christophe Blot, 2006. "Peut-on parler de bulle sur le marché immobilier au Luxembourg ?," BCL working papers 20, Central Bank of Luxembourg.
    5. Bjørnland, Hilde C. & Leitemo, Kai, 2009. "Identifying the interdependence between US monetary policy and the stock market," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 275-282, March.
    6. Beatrice Simo-Kengne & Stephen Miller & Rangan Gupta & Mehmet Balcilar, 2016. "Evolution of the Monetary Transmission Mechanism in the US: the Role of Asset Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 52(3), pages 226-243, April.
    7. Ricardo Gimeno & Carmen Martínez-Carrascal, 2006. "The interaction between house prices and loans for house purchase. The Spanish case," Working Papers 0605, Banco de España.
    8. Beatrice D. Simo-Kengne & Stephen M. Miller & Rangan Gupta, 2013. "Evolution of Monetary Policy in the US: The Role of Asset Prices," Working Papers 201343, University of Pretoria, Department of Economics.
    9. Borgy, Vladimir & Clerc, Laurent & Renne, Jean-Paul, 2014. "Measuring aggregate risk: Can we robustly identify asset-price boom–bust cycles?," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 132-150.
    10. Drobyshevsky Sergey & Narkevich Sergey & E. Pikulina & D. Polevoy, 2009. "Analysis Of a Possible Bubble On the Russian Real Estate Market," Research Paper Series, Gaidar Institute for Economic Policy, issue 128.
    11. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    12. repec:zbw:bofrdp:2005_017 is not listed on IDEAS
    13. Wagner, Helmut & Kißmer, Friedrich & Funke, Norbert, 2006. "International Lessons for the Property Price Boom in South Africa," Proceedings of the German Development Economics Conference, Berlin 2006 27, Verein für Socialpolitik, Research Committee Development Economics.
    14. repec:ipg:wpaper:2014-459 is not listed on IDEAS
    15. Bjørnland, Hilde C. & Leitemo, Kai, 2009. "Identifying the interdependence between US monetary policy and the stock market," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 275-282, March.
    16. Michael D. Bordo & David C. Wheelock, 2004. "Monetary policy and asset prices: a look back at past U.S. stock market booms," Review, Federal Reserve Bank of St. Louis, vol. 86(Nov), pages 19-44.
    17. Béchir Bouzid, 2010. "Titrisation des emprunts hypothécaires et bulle immobilière aux États-Unis : les origines d’une débâcle," Revue d'Économie Financière, Programme National Persée, vol. 97(2), pages 101-142.
    18. Berger, Wolfram & Kißmer, Friedrich, 2013. "Central bank independence and financial stability: A tale of perfect harmony?," European Journal of Political Economy, Elsevier, vol. 31(C), pages 109-118.
    19. Christophe Blot & Paul Hubert & Fabien Labondance, 2017. "Does monetary policy generate asset price bubbles ?," SciencePo Working papers Main hal-03471824, HAL.
    20. Jordà, Òscar & Schularick, Moritz & Taylor, Alan M., 2015. "Leveraged bubbles," Journal of Monetary Economics, Elsevier, vol. 76(S), pages 1-20.
    21. repec:spo:wpmain:info:hdl:2441/2geqol5jud8hgonsak4roj21gh is not listed on IDEAS
    22. repec:hal:spmain:info:hdl:2441/2822 is not listed on IDEAS
    23. International Monetary Fund, 2006. "Spain: Financial Sector Assessment Program: Technical Note: Housing Prices, Household Debt, and Financial Stability," IMF Staff Country Reports 2006/210, International Monetary Fund.
    24. Kenneth Kuttner, 2011. "Monetary Policy and Asset Price Volatility: Should We Refill the Bernanke-Gertler Prescription?," Department of Economics Working Papers 2011-04, Department of Economics, Williams College, revised Jun 2011.

    More about this item

    Keywords

    monetary policy; transmission process; stock prices; residential property prices; Eurosystem;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbb:ecrart:y:2005:m:september:i:iii:p:65-78. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bnbgvbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.