American Security Prices and Interest Rates

The High Correlations of Prices and Interest Rates across Nations

We document that at business cycle frequency, nominal variables, such as aggregate price levels and nominal interest rates, are more correlated across countries than real output. Since national central banks control the domestic money supply and their objective has been to keep the nominal environment stable this might seem puzzling. We ask whether a simple, transparent standard international b...

Money, Prices, Interest Rates and the Business Cycle

The mechanisms governing the relationship of money, prices and interest rates to the business cycle are one of the most studied and most disputed topics in macroeconomics. In this paper, we first document key empirical aspects of this relationship. We then ask how well three benchmark rational expectations macroeconomic models – a real business cycle model, a sticky price model and a liquidity ...

REITs, interest rates and stock prices in Malaysia

This paper examines the dynamic linkages between real estate investment trusts (REITs), which are a proxy for investment in real estate, interest rates and stock prices in Malaysia over the period 2006 to 2009. Two mechanisms have been proposed to interpret the relationship between investment in real estate and stocks. The first is the wealth effect, which states that investors with unanticipat...

The Role of Interest Rates in Influencing Housing Prices

This paper investigates the role of interest rates on housing prices from the perspective of homeowners’ expectations. Using quarterly data on interest rates and housing prices for Hong Kong in 1981-2001, it identifies a structural shift in housing prices coinciding with a move from inflation to deflation around 1997. The results indicate a moderately high correlation between housing prices and...

Interest and Prices