What determines simultaneous asset bubbles? An empirical analysis

Christian Drescher and Bernhard Herz

Applied Economics, 2016, vol. 48, issue 1, 35-51

Abstract: The recent global financial crisis demonstrated that the simultaneous collapse of asset bubbles in different countries is a major challenge for monetary policy. In order to evaluate determinants of these simultaneous asset bubbles, we detect rational asset bubbles in corporate equity and real estate markets worldwide using forward recursive right-sided ADF tests. Then we create dummy variables for simultaneous asset bubbles and analyse potential determinants using gravity models and spatial economics. Our empirical analysis suggests that simultaneous asset bubbles depend positively upon potential asset demand, capital account openness, monetary conditions, cultural similarities and negatively upon informational frictions and exchange rate flexibility. These findings imply that monetary policy can impede the probability of simultaneous asset bubbles by ensuring sound monetary conditions and choosing a flexible exchange regime.

Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2015.1073841 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:48:y:2016:i:1:p:35-51

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2015.1073841

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().