Asset price inflation is the economic phenomenon whereby the price of assets rise and become inflated. A common reason for higher asset prices is low interest rates.[1] When interest rates are low, investors and savers cannot make easy returns using low-risk methods such as government bonds or savings accounts. To still get a return on their money, investors instead have to buy up other assets such as stocks and real estate, thereby bidding up the price and creating asset price inflation.
When people talk about inflation, they usually refer to ordinary goods and services, which is tracked by the Consumer Price Index (CPI). This index excludes most financial assets and capital assets. Inflation of such assets should not be confused with inflation of consumer goods and services, as prices in the two categories are usually disconnected. The prices of some goods and services such as housing, energy, and food do track closely with some financial assets.
Examples of typical assets are shares and bonds (and their derivatives), as well as real estate, gold and other capital goods. They can also include alternative investment assets such as fine art, luxury watches, cryptocurrency, and venture capital.
^Robert, Shiller. "LOW INTEREST RATES AND HIGH ASSET PRICES: AN INTERPRETATION IN TERMS OF CHANGING POPULAR MODELS" (PDF). Cowles Foundation for Research in Economics, Yale University.
and 27 Related for: Asset price inflation information
Assetpriceinflation is the economic phenomenon whereby the price of assets rise and become inflated. A common reason for higher assetprices is low interest...
economics, inflation is a general increase in the prices of goods and services in an economy. This is usually measured using the consumer price index (CPI)...
acceptance of assetpriceinflation from 2019 onwards resulted in levels of wealth inequality not seen in the United States since the 1920s. Fed asset purchases...
averaged 3.8% using CPI. Economics portal Consumer price index by country Assetpriceinflation Core inflation Cost of living index FRED (Federal Reserve Economic...
The Japanese assetprice bubble (バブル景気, baburu keiki, lit. 'bubble economy') was an economic bubble in Japan from 1986 to 1991 in which real estate and...
a speculative bubble or a financial bubble) is a period when current assetprices greatly exceed their intrinsic valuation, being the valuation that the...
financial market impact of the COVID-19 pandemic, Powell accepted assetpriceinflation as a consequence of Fed policy actions. Powell was criticized for...
predict future prices. This makes it risky to invest in certain assets, such as commodities, that may be impacted by inflation. Inflation can erode the...
the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the...
inflation and the value of an asset in relation to its purchasing power. In macroeconomics, the real gross domestic product compensates for inflation...
Value fluctuates due to current interest and inflation rates includes "guaranteed" or "risk-free" assets Also includes money market instruments (short-term...
April 2011. Hudson, Michael (2015). "11. The Bubble Economy: From Asset-PriceInflation to Debt Deflation". Killing the host : how financial parasites and...
had been relying on [inflation targeting] had not paid enough attention to asset-price bubbles", and also criticized inflation targeting for "inappropriate...
credit, assetprices are bid up by those with access to leveraged capital. This assetpriceinflation can then cause an unsustainable speculative price "bubble"...
increases in consumer prices." Schiff's critics pointed out that although assetpriceinflation has been significant, consumer priceinflation rates remained...
Other examples can be found in pricing financial derivatives and other financial assets. For instance the price of inflation-linked government securities...
finance, the capital assetpricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions...
result in inflation if pursued beyond the point of full employment, and Chartalists generally do not argue for inflation. Assetpriceinflation Chronic...
in excess consumption and assetpriceinflation. In the context of BoP and international monetary systems, the reserve asset is the currency or other store...
objectives like high employment and price stability (normally interpreted as a low and stable rate of inflation). Further purposes of a monetary policy...
with regular price level adjusted statements. Following three points are important in the process of Inflation Accounting : 1. Inflation accounting is...
Foreign Asset Control, US Treasury Department. Archived from the original (PDF) on 25 January 2017. See, for instance, Friedman, Milton. Inflation: Causes...
arbitrage pricing theory (APT) is a multi-factor model for assetpricing which relates various macro-economic (systematic) risk variables to the pricing of financial...
very high and typically accelerating inflation. It quickly erodes the real value of the local currency, as the prices of all goods increase. This causes...
The Inflation Reduction Act of 2022 (IRA) is a landmark United States federal law which aims to curb inflation by possibly reducing the federal government...
include negative correlation with other asset classes such as equities and bonds, as well as protection against inflation. The disadvantages include a negative...