The Link between Monetary Policy, Stock Prices, and House Prices—Evidence from a Statistical Identification Approach

Helmut Herwartz, Simone Maxand and Hannes Rohloff
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Helmut Herwartz: University of Göttingen
Simone Maxand: Europa-Universität Viadrina
Hannes Rohloff: Europa-Universität Viadrina

International Journal of Central Banking, 2022, vol. 18, issue 5, 1-53

Abstract: This paper revisits the monetary policy–asset price nexus within a medium-sized structural VAR for the United States. With regard to identification, we put a recent approach into the spotlight of the analysis that exploits the uniqueness of linear combinations of non-Gaussian independent components under quite flexible distributional assumptions and at low computational cost. The economic interpretation of statistically identified shocks follows from utilizing informative external shock series. In a comparative analysis the benchmark identification scheme is cast into the context of a handful of alternative identification approaches. Our results indicate that contractionary monetary policy shocks have a mildly negative impact on both U.S. house and stock prices. The effect is less pronounced for equity. Moreover, we find considerable differences in the speed of monetary policy transmission among stock and house prices. Benchmark monetary policy shocks are rather robust for a variety of dynamic syst ms (and sample periods). Among corresponding estimates from alternative identification schemes, benchmark shocks align soundly with diverse economic underpinnings.

JEL-codes: C32 E44 E52 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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