Asset Price Inflation in the 1980's: A Flow of Funds Perspective
IMF Working Papers, October 1, 1993
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- Asset Price Inflation in the 1980's: A Flow of Funds Perspective
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Bibliographic details
- Authors: Garry J. Schinasi, Steven Riess Weisbrod, Monica Hargraves
- Published: October 1, 1993
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451849936.001
Summary
- Examines how and why financial resources were channeled almost exclusively to specific asset markets in Japan, the United Kingdom, and the United States in the late 1980s.
- Identifies a decline in demand for funds by traditional borrowers and a shift by savers from banks toward indirect securities investments as critical factors in all three cases.
- Notes that until intermediaries and investors learned to evaluate new opportunities, funds were recycled in certain asset markets.
- Emphasizes that pressures on Japanese asset markets were particularly intense because of the size of Japan’s domestic saving relative to traditional domestic investment opportunities.
Key Findings
- Financial resources concentrated in a limited set of asset markets in the late 1980s across Japan, the United Kingdom, and the United States.
- Decline in demand for funds by traditional borrowers contributed to reallocations of financial flows.
- Shift by savers away from bank deposits toward indirect securities investments was a common driver.
- Recycling of funds into certain asset markets occurred while intermediaries and investors adapted to new investment opportunities.
- Japan experienced especially intense asset-market pressures due to the large size of domestic saving relative to traditional domestic investment opportunities.
Mechanisms and Dynamics
- Saver behavior: migration from banks to indirect securities investments altered supply of funds available through traditional banking channels.
- Intermediary adaptation: limited initial capacity of intermediaries and investors to evaluate new opportunities led to concentrated recycling of funds.
- Country-specific amplification: Japan’s high domestic saving relative to investment possibilities magnified asset-price pressures.
Subjects and Keywords (as listed)
- Subjects: Asset prices, Bank deposits, Banking, Business enterprises, Economic sectors, Financial institutions, Inflation, Prices, Real estate prices, Securities
- Keywords: asset, asset decision, asset inflation, asset price inflation, Asset prices, bank, bank assets, bank depositor, bank investment, bank portfolio, Business enterprises, city bank, deposit, Inflation, inflation in Japan, insurance assets, mortgage market, net, price, Real estate prices, Securities, WP