This paper studies the wealth channel in China. Using the structural vector autoregression method, we find that a loosening of China’s monetary policy indeed leads to higher asset prices, which in turn are linked to household consumption. However, the importance of the wealth channel as a part...

We challenge the view that the relationship between money and prices is too loose in countries with low inflation rates and argue that cross-border portfolio shifts are the root cause of the volatility in real money balances. The novelty of this paper is that we model jointly in the euro area...

This paper takes a financial market perspective in examining the relationship between oil prices, the US dollar and asset prices, and it exploits the heteroskedasticity for the identification of causality in a multifactor model. It finds a bidirectional causality between the US dollar and oil...

This paper presents a simple new method for measuring `wealth effects' on aggregate consumption. The method exploits the stickiness of consumption growth (sometimes interpreted as reflecting consumption `habits') to distinguish between immediate and eventual wealth effects. In U.S. data, we...

We analyze the interaction between credit and asset prices in the transmission of shocks to the real economy. We estimate a Markov switching VAR for the euro area and the US, including additionally GDP, CPI and a short-term interest rate. We find evidence for two distinct states in both regions....

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...

The paper analyses the effect of equity price shocks on current account positions for the G7 industrialized countries in 1974-2007. It uses a Bayesian VAR with sign restrictions for the identification of asset price shocks and to test empirically for their effect on current accounts. Such shocks...

There is a broad consensus that the quality of the political system and its institutions are fundamental for a country’s prosperity. The paper focuses on olitical events in Italy over the past 35 years and asks whether the adoption of the euro in 1999 has helped insulate Italy’s financial...

This paper uses a factor-augmented vector autoregressive model (FAVAR) estimated on U.S. data in order to analyze monetary transmission via private sector balance sheets, credit risk spreads and asset markets in an integrated setup and to explore the role of monetary policy in the three...

The paper shows that monetary policy shocks exert a substantial effect on the size and composition of capital flows and the trade balance for the United States, with a 100 basis point easing raising net capital inflows and lowering the trade balance by 1% of GDP, and explaining about 20-25% of...