DP12460 Asset Prices and Macroeconomic Outcomes: A Survey

Author(s): Stijn Claessens, Ayhan Kose
Publication Date: November 2017
Keyword(s): asset prices, equity prices, frictions, imperfections, macro-financial linkages, real-financial linkages
JEL(s): D53, E21, E32, E44, E51, F36, F44, F65, G01, G10, G12, G14, G15, G21
Programme Areas: International Macroeconomics and Finance
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12460

This paper surveys the literature on the linkages between asset prices and macroeconomic outcomes. It focuses on three major questions. First, what are the basic theoretical linkages between asset prices and macroeconomic outcomes? Second, what is the empirical evidence supporting these linkages? And third, what are the main challenges to the theoretical and empirical findings? The survey addresses these questions in the context of four major asset price categories: equity prices, house prices, exchange rates and interest rates, with a particular focus on their international dimensions. It also puts into perspective the evolution of the literature on the determinants of asset prices and their linkages with macroeconomic outcomes, and discusses possible future research directions.