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Measuring asset price inflation: a quantitative approach

Gustafsson, Anders LU (2010) NEKM01 20102
Department of Economics
Abstract (Swedish)
This essays investigates the relationship between central banks, monetary policy and asset prices. Assets are defined as stocks and real estate. Inflations is treated as a purely monetary phenomenon caused by too much money being created, more then is appropriate according to the quantity equation. This as opposed to the New Keynesian theory where no special interest in asset prices is taken when measuring inflation. Hence this essays uses a much broader definition of prices and purchasing power then most central banks do today. The main reasons for investigating asset price inflation caused by monetary policy is that this could lead to asset price bubbles which in turn can create very large welfare losses. Also the essays argue that... (More)
This essays investigates the relationship between central banks, monetary policy and asset prices. Assets are defined as stocks and real estate. Inflations is treated as a purely monetary phenomenon caused by too much money being created, more then is appropriate according to the quantity equation. This as opposed to the New Keynesian theory where no special interest in asset prices is taken when measuring inflation. Hence this essays uses a much broader definition of prices and purchasing power then most central banks do today. The main reasons for investigating asset price inflation caused by monetary policy is that this could lead to asset price bubbles which in turn can create very large welfare losses. Also the essays argue that inflation in asset prices is a problem that should be combated just as consumer price inflation is combated. The results show some weak support for the hypothesis. The results are however far from conclusive and several interpretations are discussed. (Less)
Please use this url to cite or link to this publication:
author
Gustafsson, Anders LU
supervisor
organization
course
NEKM01 20102
year
type
H1 - Master's Degree (One Year)
subject
keywords
Asset prices, inflation, quantitative theory, central bank policy
language
English
id
1712942
date added to LUP
2010-12-16 14:11:21
date last changed
2010-12-16 14:11:21
@misc{1712942,
  abstract     = {This essays investigates the relationship between central banks, monetary policy and asset prices. Assets are defined as stocks and real estate. Inflations is treated as a purely monetary phenomenon caused by too much money being created, more then is appropriate according to the quantity equation. This as opposed to the New Keynesian theory where no special interest in asset prices is taken when measuring inflation. Hence this essays uses a much broader definition of prices and purchasing power then most central banks do today. The main reasons for investigating asset price inflation caused by monetary policy is that this could lead to asset price bubbles which in turn can create very large welfare losses. Also the essays argue that inflation in asset prices is a problem that should be combated just as consumer price inflation is combated. The results show some weak  support for the hypothesis. The results are however far from conclusive and several interpretations are discussed.},
  author       = {Gustafsson, Anders},
  keyword      = {Asset prices,inflation,quantitative theory,central bank policy},
  language     = {eng},
  note         = {Student Paper},
  title        = {Measuring asset price inflation: a quantitative approach},
  year         = {2010},
}