This thesis consists of two essays on the relations hip between monetary policy and asset price dynamics. The first essay examines the extent to which Greece, Ireland, Portugal and Spain experienced property bubbles and investigates the role of European Central Bank’s (ECB) monetary policy in the formation of these bubbles in the period from 1999 to 2012. The analysis shows that Spain and Ireland experienced the largest bubble formation followed by Portugal and Greece. Cointegration tests and VEC impulse responses indicate a significant long-and short-run relationship between ECB’s monetary policy and bubble formation in Greece, Ireland and Spain. The second essay examines long- and short-run dynamics between global commodity prices, economic activity and monetary policy of China in the period from 1998M01 to 2012M12. While Toda and Yamamoto (1995) type Granger causality tests provide no evidence for a long-run relationship between monetary policy and commodity prices, VAR generalized impulse responses suggests that agricultural commodity prices overshoot in response to a drop in the real interest rate. The analysis further finds evidence that industrial metals prices tend to be higher when China’s exchange rate regime is relaxed.

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