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What determines simultaneous asset bubbles? An empirical analysis

Title data

Drescher, Christian ; Herz, Bernhard:
What determines simultaneous asset bubbles? An empirical analysis.
In: Applied Economics. Vol. 48 (23 September 2016) Issue 1 . - pp. 35-51.
ISSN 0003-6846
DOI: https://doi.org/10.1080/00036846.2015.1073841

Abstract in another language

The recent global financial crisis demonstrated that the simultaneous collapse of asset bubbles in different countries is a major challenge for monetary policy. In order to evaluate determinants of these simultaneous asset bubbles, we detect rational asset bubbles in corporate equity and real estate markets worldwide using forward recursive right-sided ADF tests. Then we create dummy variables for simultaneous asset bubbles and analyse potential determinants using gravity models and spatial economics. Our empirical analysis suggests that simultaneous asset bubbles depend positively upon potential asset demand, capital account openness, monetary conditions, cultural similarities and negatively upon informational frictions and exchange rate flexibility. These findings imply that monetary policy can impede the probability of simultaneous asset bubbles by ensuring sound monetary conditions and choosing a flexible exchange regime.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Asset bubbles; recursive ADF; bivariate logit panel estimations; gravity model; spatial economics
Subject classification: JEL CLASSIFICATION: C21, E52, G12
Institutions of the University: Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I > Chair Economics I - Univ.-Prof. Dr. Bernhard Herz
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 30 Nov 2017 07:58
Last Modified: 30 Nov 2017 07:58
URI: https://eref.uni-bayreuth.de/id/eprint/40595