TY  - JOUR
AU  - Bordo,Michael D.
AU  - Wheelock,David C.
TI  - Monetary Policy and Asset Prices: A Look Back at Past U.S. Stock Market Booms
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10704
PY  - 2004
Y2  - August 2004
UR  - http://www.nber.org/papers/w10704
L1  - http://www.nber.org/papers/w10704.pdf
N1  - Author contact info:
Michael D. Bordo
Department of Economics
Rutgers University
New Jersey Hall
75 Hamilton Street
New Brunswick, NJ 08901
Tel: 732/822-7152
Fax: 732/932-7416
E-Mail: bordo@econ.rutgers.edu

David C. Wheelock
Research Division
Federal Reserve Bank of St. Louis
P.O. Box 442
St. Louis, MO 63166-0442
Tel: (314) 444-8570
Fax: (314) 444-8731
E-Mail: david.c.wheelock@stls.frb.org
AB  - This paper examines the economic environments in which past U.S. stock market booms occurred as a first step toward understanding how asset price booms come about and whether monetary policy should be used to defuse booms. We identify several episodes of sustained rapid rise in equity prices in the 19th and 20th Centuries, and then assess the growth of real output, productivity, the price level, money and credit stocks during each episode. Two booms stand out in terms of their length and rate of increase in market prices -- the booms of 1923-29 and 1994-2000. In general, we find that booms occurred in periods of rapid real growth and productivity advance, suggesting that booms are driven at least partly by fundamentals. We find no consistent relationship between inflation and stock market booms, though booms have typically occurred when money and credit growth were above average.
ER  -