Role of credit and monetary policy in determining asset prices: Evidence from emerging market economies

Bhupal Singh and Avadhoot R. Nadkarni

The North American Journal of Economics and Finance, 2020, vol. 51, issue C

Abstract: We examine the relative dominance of credit and monetary policy shocks in influencing asset prices in emerging markets. Estimates from panel VAR models for 22 EMEs provide evidence of a significant impact of bank credit on house prices in contrast to trivial impact on stock prices, possibly due to prudential regulations on banks’ exposure to stock markets. Contractionary monetary policy triggers sizeable and persistent decline in stock than housing prices as higher interest rates may render the funding of leverage costlier. Global shocks play an important role in explaining fluctuations in domestic stock prices rather than house prices since the latter class of asset is largely non-tradable across countries.

Keywords: Asset prices; Bank credit; Monetary policy; Emerging market economies (search for similar items in EconPapers)
JEL-codes: E44 E51 E52 G12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940818302900

DOI: 10.1016/j.najef.2018.11.003

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