Should Central Banks of ASEAN Countries Respond to Movements in Asset Prices?

Abstract

The purpose of this study was to analyze whether monetary policy can be used as an instrument to control asset prices using a VECM and Panel-VAR approach. The research was conducted by analyzing the impulse response of the monetary policy shock on residential property prices, stock prices, output and inflation, both in each country  and  as a groups of countries.  Results of the study indicate that monetary policy still can’t be directed to asset price stabilization. Changes in monetary policy to control asset prices will cause turmoil on output and inflation. Central bank intervention to anticipate the formation of asset price bubbles can be reached by regulation may indirectly affect to the asset price movements.

Keywords: asset prices bubble, monetary policy, panel VAR