RT Journal Article
SR Electronic
T1 Global Liquidity and Asset Prices Revisited
JF Trading
FD Institutional Investor Journals
SP 29
OP 39
VO 2010
IS 1
A1 Ansgar H Belke
A1 Ingo G Bordon
A1 Torben W Hendricks
A1 Walter R Orth
YR 2010
UL http://guides.pm-research.com/content/2010/1/29.abstract
AB This article surveys recent research on the relationship between global liquidity and asset prices on a global scale. How important is global liquidity? How are asset prices and other significant macro variables affected by global monetary conditions? The article highlights the perspective of an international transmission of monetary shocks, focusing particularly on the effects of a global monetary aggregate (global liquidity) on different asset prices, namely commodity, house, and share prices. The authors sum up the main results of empirical analyses in VAR and CVAR models for the global economy using aggregated data that represent the major OECD countries. According to the first benchmark study focusing on house prices, the authors find that a positive shock to global liquidity leads to permanent increases in the global price level and in the global house price index, with the latter reaction being even more distinctive, leading to subsequent spill-over effects from house prices to consumer prices. The second benchmark study examines the interactions between money, consumer, and commodity prices at a global level using a cointegrating VAR framework. The article establishes long-run and short-run relationships among these variables, while the process is driven mainly by global liquidity.