Low interest rates and high asset prices
Subtitle: an interpretation in terms of changing popular economic models
By: Robert J. Shiller.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series -- no. 13558.; Working paper series (National Bureau of Economic Research) -- working paper no. 13558.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 32
Subjects: Assets (Accounting) -- Prices -- Econometric models; Assets (Accounting) -- Prices -- Psychological aspects; Interest rates
Description: There has been a widespread perception in the past few years that long-term asset prices are generally high because monetary authorities have effectively kept long-term interest rates, which the market uses to discount cash flows, low. This perception is not accurate. Long-term interest rates have not been especially low. What has changed to produce high asset prices appears instead to be changes in popular economic models that people actually rely on when valuing assets. The public has mostly forgotten the concept of "real interest rate." Money illusion appears to be an important factor to consider.
Notes: "October 2007"

Includes bibliographical references (p. 29-32).

Also available in PDF from the NBER world wide web site (www.nber.org).