Ensuring Financial Stability: Financial Structure and the Impact of Monetary Policy on Asset Prices

Institute for Empirical Research in Economics Working Paper No. 361

36 Pages Posted: 1 Apr 2008

See all articles by Katrin Assenmacher

Katrin Assenmacher

Swiss National Bank

Stefan Gerlach

Central Bank of Ireland; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2008

Abstract

This paper studies the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006. We estimate VARs for individual economies and panel VARs in which we distinguish between groups of countries on the basis of the characteristics of their financial systems. The results suggest that using monetary policy to offset asset price movements in order to guard against financial instability may have large effects on economic activity. Furthermore, while financial structure influences the impact of policy on asset prices, its importance appears limited.

Keywords: asset prices, monetary policy, panel VAR

JEL Classification: C23, E52

Suggested Citation

Assenmacher, Katrin and Gerlach, Stefan, Ensuring Financial Stability: Financial Structure and the Impact of Monetary Policy on Asset Prices (March 2008). Institute for Empirical Research in Economics Working Paper No. 361, Available at SSRN: https://ssrn.com/abstract=1114053 or http://dx.doi.org/10.2139/ssrn.1114053

Katrin Assenmacher (Contact Author)

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland

Stefan Gerlach

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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