Nu este disponibil în limba română
Cajsa Klass
- 17 June 2025
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 4, 2025Details
- Abstract
- This box explores whether the effect of tightening financial conditions on US economic growth varies depending on the level of equity valuations. Financial conditions indices (FCIs) offer a consolidated measure of the costs of financing for households, firms and governments and typically incorporate interest rates, equity prices, corporate bond spreads and exchange rates. Using an exemplary FCI, we find that equity prices significantly influence US financial conditions when equity markets are overvalued. That, however, is shown to weaken their economic growth signal. This finding suggests that policymakers and analysts should remain attentive to the role of individual FCI components, especially during periods of atypical valuations.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy