CXO

Asset Price Misalignments And The Role Of Money And Credit

Date Added: Jul 2009
Format: PDF

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, the authors 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.