This situation might allow more liquid monetary conditions than would otherwise be the case. Distinguishing the various forces in play obviously requires tools that are finer than simple observations that both liquidity measures and assets prices are moving together.
Identification of unsustainable movements The example cited above also should remind us that not all situations in which asset prices are rising rapidly under seemingly easy monetary conditions are worrisome. Some are quite benign and even signal a healthy economy. Accordingly, for policymakers who have to confront these situations in real time, a fundamental challenge is identification.