Asset price bubbles in a monetary union: Mind the convergence gap
Adam Czerniak (),
Jakub Boratyński and
International Review of Economics & Finance, 2020, vol. 67, issue C, 288-302
We estimate logit models of housing and stock price bubbles, using panel data for 15 EU countries for the time period 1995–2014, covering a wide set of determinants: monetary, macroeconomic, demographic, institutional and those arising from monetary integration. Our key finding is that higher degree of real convergence diminishes the probability of a bubble in the housing market caused by a fall in interest rates after joining the monetary union. Applying these results to three Central European countries (the Czech Republic, Hungary and Poland) we conclude that, given the existing economic distance in terms of per capita GDP between the three countries and the top eurozone performers, joining the monetary union would ceteris paribus significantly increase the probability of house price bubbles in those countries. This result suggests that the optimum currency area framework should be broadened to include the degree of real convergence between the monetary union and the acceding country.
Keywords: Asset price bubbles; Monetary integration; Real convergence (search for similar items in EconPapers)
JEL-codes: F36 F45 O47 R21 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
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:reveco:v:67:y:2020:i:c:p:288-302
Access Statistics for this article
International Review of Economics & Finance is currently edited by H. Beladi and C. Chen
More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().