Understanding Asset Prices: An Overview

38 Pages Posted: 1 Aug 2008

Date Written: March 2007

Abstract

This paper reviews analytical work carried out by central banks that participated at the Autumn Meeting of Central Bank Economists on "Understanding asset prices: determinants and policy implications", which the BIS hosted on 30-31 October 2006. The paper first discusses some general properties of asset prices, focusing on volatilities and co-movements. It then reviews studies that look at determinants of asset prices and that attempt to estimate a fair value of assets. The next part of the paper focuses on research that aims at measuring the impact of changes in asset wealth on the real economy. It then goes on to discuss how central banks use information from asset prices to develop indicators of market expectations that are useful for monetary policy purposes. Finally, the paper reviews central banks' views on whether monetary policy should react in a direct way to asset price developments.

Suggested Citation

Settlements, Bank for International, Understanding Asset Prices: An Overview (March 2007). BIS Paper No. 34, Available at SSRN: https://ssrn.com/abstract=1190962 or http://dx.doi.org/10.2139/ssrn.1190962

Bank for International Settlements (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4051
Switzerland

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