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Does monetary policy generate asset price bubbles ?
Abstract : This paper empirically assesses the effect of monetary policy on asset price bubbles and aims
to disentangle the competing predictions of theoretical bubble models. First, we take
advantage of the model averaging feature of Principal Component Analysis to estimate
bubble indicators, for the stock, bond and housing markets in the United States and Euro
area, based on the structural, econometric and statistical approaches proposed in the
literature to measure bubbles. Second, we assess the linear and non-linear effect of monetary
shocks on these bubble components using local projections. The main result of this paper is
that monetary policy does not affect asset price bubble components, except for the US stock
market for which we find evidence in favor of the prediction of rational bubble models.
https://hal-sciencespo.archives-ouvertes.fr/hal-03471824
Contributor : Spire Sciences Po Institutional Repository Connect in order to contact the contributor
Submitted on : Thursday, December 9, 2021 - 3:54:34 AM
Last modification on : Friday, March 25, 2022 - 3:58:38 AM
Contributor : Spire Sciences Po Institutional Repository Connect in order to contact the contributor
Submitted on : Thursday, December 9, 2021 - 3:54:34 AM
Last modification on : Friday, March 25, 2022 - 3:58:38 AM
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