Liquidity and the Dynamic Pattern of Asset Price Adjustment: A Global View

Ansgar Belke (), Walter Orth and Ralph Setzer ()

No 933, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: Global liquidity expansion has been very dynamic since 2001. Contrary to conventional wisdom, high money growth rates have not coincided with a concurrent rise in goods prices. 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.

Keywords: Global liquidity; inflation control; monetary policy transmission; asset prices (search for similar items in EconPapers)
JEL-codes: E31 E52 F01 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
Date: 2009
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Published in: Journal of Banking & Finance 34 (2010) Iss. 8, 1933-1945

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Journal Article: Liquidity and the dynamic pattern of asset price adjustment: A global view (2010)
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