Funding Conditions, Asset Prices, and Macroeconomic Dynamics: Some U.S. Evidence

44 Pages Posted: 3 Jan 2011

See all articles by Carmine Trecroci

Carmine Trecroci

University of Brescia

Matilde Vassalli

University of Brescia - Department of Economics

Date Written: January 3, 2011

Abstract

Funding liquidity, i.e., the ease with which firms, investors and consumers can obtain funding, is a key property of the monetary transmission mechanism. This paper is an empirical assessment of the role played by various measures of credit availability in shaping the dynamics of asset prices and the fluctuations of real activity in the US. We find that changes in funding conditions are more tightly associated with future asset valuations than with developments in key macroeconomic aggregates. This highlights some potentially destabilizing properties in recent liquidity cycles.

Keywords: Business Cycle, Asset Prices, Funding Conditions, Monetary Policy

JEL Classification: E44, E51, G1

Suggested Citation

Trecroci, Carmine and Vassalli, Matilde, Funding Conditions, Asset Prices, and Macroeconomic Dynamics: Some U.S. Evidence (January 3, 2011). Available at SSRN: https://ssrn.com/abstract=1733975 or http://dx.doi.org/10.2139/ssrn.1733975

Carmine Trecroci (Contact Author)

University of Brescia ( email )

Via San Faustino 74B
Brescia, 25122
Italy

Matilde Vassalli

University of Brescia - Department of Economics ( email )

Via San Faustino 74B
Brescia, 25122
Italy

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