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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26387
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| Title: | | Asset price shocks, real expenditures, and financial structure: a multi-country analysis  |
| Authors: | | Chirinko, Robert S. de Haan, Leo Sterken, Elmer |
| Issue Date: | | 2008 |
| Series/Report no.: | | CESifo working paper 2342 |
| Abstract: | | This paper examines the responses of private consumption, residential investment, and business investment in 11 EU countries, Japan, and the United States to shocks in housing and equity prices. The effects are assessed with a Structural Vector Auto Regressive (SVAR) model, and four key findings emerge. First, the impacts of asset price shocks are heterogeneous across countries. Second, these heterogeneous responses are systematically related to cross-country variation in financial structure. We are thus able to document the importance of a wealth/balance sheet channel for private consumption and residential investment and an equity finance channel for business investment. Third, for a given country, housing shocks have a much greater impact than equity shocks. Fourth, variance decompositions indicate that monetary policy reacts to equity price shocks but not to housing price shocks. These results highlight the important role played by asset prices on real activity and fuel the debate about the inclusion of asset prices in the formulation of monetary policy. |
| Subjects: | | Monetary policy asset prices structural VAR |
| JEL: | | E44 E52 E2 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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