ISSN: 2225-8329
Open access
In this study, we identify the monetary policy mechanisms that lead to inflation in asset prices in the 2011-2020 decade (post-2008 crisis and COVID19 period), by focusing on the relationship between increases in asset prices and disposable personal income. We run a panel data regression by using quarterly data from fourteen OECD countries, and by taking minimum wages as a proxy for disposable personal income, and stock market indices as a proxy for asset prices. We show that expansionary monetary policy – via M3 money supply and credits given to non-financial private sector – positively impacts equity prices, and even leads to equity price booms. Moreover, we show that individuals with low level of income faced a decrease in their asset purchasing power in this period, which is an important issue for central banks and monetary policy authorities to take into consideration. As a further research, a similar can be applied to all thirty-eight members of OECD, by distinguishing developed and developing countries, and focus on increases in different layers of income levels and different assets, such as housing.
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In-Text Citation: (Ardogan & Yilmaz, 2021)
To Cite this Article: Ardogan, A. R., & Yilmaz, R. C. (2021). An Analysis on Asset Price Inflation: Impact of Expansionary Monetary Policy on Asset Purchasing Power. International Journal of Academic Research in Accounting Finance and Management Sciences, 11(3), 33–47.
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