Asset Price

Asset Price

The amount one pays for an asset when buying it. The price represents the amount of value the market has assigned, fairly or unfairly, to an asset. Normally, prices are expressed in terms of money, but this is not always the case; for example, one may trade four chickens for two sheep.

Asset prices tend to be regulated by the law of supply and demand; that is, the price of an asset increases with smaller supply and/or greater demand. A corollary to this is the idea that commoditization drives prices down because it increases supply (sometimes vastly) while leaving demand the same. Prices likewise rise when the value of money declines. Governments can and have controlled the prices of certain assets by subsidy or decree. This is usually an anti-inflationary measure and tends to distort, rather than eliminate, the law of supply and demand. It is thus not generally sustainable as a mechanism for controlling price.
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Unquestionably, asset price bubbles (stocks, real estate), commodity bubbles (oil) and, in particular, the massive credit bubble supporting the U.
There is no clear economic definition of what makes an asset price bubble.
In this pivot-less monetary system, there is no strong and stable demand for high-powered money such that low (but variable) growth in supply would mean sound money conditions broadly (interest rates both short and long market-determined, goods and services prices in general reverting to an unchanged mean over the long-run though fluctuating considerably in the short run, and no great episodes of asset price inflation).
ABSTRACT: The aim of this article is to demonstrate how monetary disorder spawns asset price inflation.
Moody's Global Asset Price Monitor Q3 2016 report, which analyses price trends in equities, bond markets, property, foreign exchange and private credit, found that asset prices are at elevated levels in advanced economies (AEs), while emerging market (EM) prices show fewer signs of overheating.
This implies that in the upcoming cycle, it will be economic activity that will be the cornerstone for asset price rises, and not the other way around.
a) What are the effects of monetary policy interventions on asset price bubbles?
Economic commentators often assert that major asset price booms and busts are closely associated with variations in the terms of borrowing to fund risky asset purchases.
To that end, the analysis compares the response of international asset price changes to unanticipated monetary policy actions before and after the federal funds rate hit the zero lower bound.
The asset price response to the FOMC minutes has declined since 2008, suggesting greater transparency by the Committee.
Rome: India's new central bank governor, Raghuram Rajan, called on Tuesday for regulators to exert greater caution when faced with the potentially inflammatory mix of asset price inflation and easy credit.
Considering their importance and the amount of effort that has gone into understanding them, asset price bubbles continue to perplex.

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