The signalling content of asset prices for inflation: Implications for quantitative easing
Leo de Haan () and
Jan Willem End ()
Economic Systems, 2018, vol. 42, issue 1, 45-63
We investigate the information content of financial variables as signalling devices of two abnormal inflationary regimes: (1) low inflation or deflation, and (2) high inflation. Specifically, we determine the information content of equity and house prices, private credit volumes, and sovereign and corporate bond yields, for 11 advanced economies over the past three decades, using both signalling extraction and logit modelling. The outcomes show that high asset prices more often signal high inflation than low inflation/deflation. However, in some countries, high asset prices and low bond yields are a significant indicator of low inflation or deflation as well. The transmission time of financial developments to inflation can be quite long (up to 8 quarters). For monetary policy, these findings imply that stimulating asset prices through Quantitative Easing (QE) can effectively influence inflation, but that the effects are quite uncertain, both regarding timing and direction.
Keywords: Quantitative easing; Inflation; Financial markets (search for similar items in EconPapers)
JEL-codes: E31 E44 E52 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: The signalling content of asset prices for inflation: Implications for Quantitative Easing (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:42:y:2018:i:1:p:45-63
Access Statistics for this article
Economic Systems is currently edited by R. Frensch
More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Haili He ().