Can Monetary Policy Create Asset Price Bubbles?

The objective of this paper is to find out whether expansionary monetary policy creates an upward pressure on asset prices and can thus create asset price bubbles or more precisely significantly contribute to their creation. In doing so we test the significance and the sign of coefficient on monetary policy stance indicator as a determinant of real estate and stock prices on 19 OECD countries quarterly panel data since 1980. Further we assess periods of real estate and stock price bubbles and periods of expansionary monetary policy and examine their relationship.