Asset Prices and Macroeconomic Outcomes: A Survey

This paper surveys the literature on the linkages between asset prices and
macroeconomic outcomes. It focuses on three major questions. First, what are the basic
theoretical linkages between asset prices and macroeconomic outcomes? Second, what
is the empirical evidence supporting these linkages? And third, what are the main
challenges to the theoretical and empirical findings? The survey addresses these
questions in the context of four major asset price categories: equity prices, house prices,
exchange rates and interest rates, with a particular focus on their international
dimensions. It also puts into perspective the evolution of the literature on the
determinants of asset prices and their linkages with macroeconomic outcomes, and
discusses possible future research directions.