Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37452
Authors: 
Gerdesmeier, Dieter
Reimers, Hans-Eggert
Roffia, Barbara
Year of Publication: 
2010
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Global Liquidity and Asset Prices B3-V2
Abstract: 
This paper contributes to the literature on the properties of money and credit indicators for detecting asset price misalignments. After a review of the evidence in the literature on this issue, the paper discusses the approaches that can be considered to detect asset price busts. Considering a sample of 17 OECD industrialised countries and the euro area over the period 1969 Q1 - 2008 Q3, we construct an asset price composite indicator which incorporates developments in both the stock price and house price markets and propose a criterion to identify the periods characterised by asset price busts, which has been applied in the currency crisis literature. The empirical analysis is based on a pooled probit-type approach with several macroeconomic monetary, financial and real variables. According to statistical tests, credit aggregates (either in terms of annual changes or growth gap), changes in nominal long-term interest rates and investment-to-GDP ratio combined with either house prices or stock prices dynamics turn out to be the best indicators which help to forecast asset price busts up to 8 quarters ahead.
Subjects: 
Asset prices
house prices
stock prices
financial crisis
asset price busts
probit models
monetary aggregates
credit aggregates
JEL: 
E37
E44
G10
Document Type: 
Conference Paper

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