Money and Asset Prices in Boom and Bust

80 Pages Posted: 8 Nov 2005

See all articles by Tim Congdon

Tim Congdon

Institute of Economic Affairs (IEA)


In this groundbreaking new study, IEA Fellow Tim Congdon argues that movements in the general level of asset prices (such as house prices and equity markets) are strongly influenced by the behaviour of the money supply.

Congdon bases his conclusions on analyses of three episodes in the UK, including the two notorious boom-bust cycles of the early 1970s and late 1980s, as well as the Great Depression in the USA between 1929 and 1993, and the prolonged malaise in the Japanese economy since the early 1990s. The study shows that the level of monetary growth is a key influence on asset price movements. These, in turn, have a powerful effect on incomes and expenditure and inflation.

This monograph is an important contribution to the critical debate on the role of monetary aggregates in setting monetary policy. It is also relevant to those working financial and investment markets who need to understand the causes of booms and busts in asset prices. Congdon's argument, that ignoring monetary aggregates can lead to profound instability in the real economy, is compelling.

Keywords: money, monetary policy, central banking, boom, fluctuations

JEL Classification: A10, E0, E50, E51, E52, E58

Suggested Citation

Congdon, Tim, Money and Asset Prices in Boom and Bust. IEA Hobart Paper No. 153, Available at SSRN: or

Tim Congdon (Contact Author)

Institute of Economic Affairs (IEA) ( email )

2 Lord North Street
London SW1P 3LB
United Kingdom

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