The Role of Learning for Asset Prices, Business Cycles, and Monetary Policy

This issue collects 11 articles at the frontier of the field of Dynamic Macroeconomic Theory.A majority of the articles discuss theoretical issues related to monetary policy. Many rich economies have now enjoyed a long period of stable monetary conditions, but many researchers remain puzzled as to what are the main mechanisms driving monetary stability. The field is of great importance to policymakers, and this issue's dynamic approaches will advance the debate. The other articles touch on other, equally inherently dynamic issues of macroeconomics, relating to growth, business cycles, and the role of credit. In light of the hard constraints we imposed on the length of the contributed articles, we will let the articles speak for themselves, and hope that the reader will enjoy this research sample as much as we do.

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Asset Prices, Nominal Rigidities, and Monetary Policy: Role of Price Indexation

Theoretical Economics Letters ◽

10.4236/tel.2013.33030 ◽

2013 ◽

Vol 03 (03) ◽

pp. 182-187

Author(s):

Kengo Nutahara

Keyword(s):

Monetary Policy ◽

Asset Prices ◽

Nominal Rigidities

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The Role of Monetary Policy in Transmission of Asset Prices into Goods Prices

Journal of Applied Economics and Business Studies ◽

10.34260/jaebs.417 ◽

2020 ◽

Vol 4 (1) ◽

pp. 143-167

Author(s):

Sidra Mariyam ◽

Wasim Shahid Malik

Keyword(s):

Monetary Policy ◽

Exchange Rate ◽

Interest Rate ◽

Stock Prices ◽

Asset Prices ◽

Inflation Rate ◽

House Prices ◽

Asset Price ◽

Price Inflation

Monetary policy in the contemporary world reacts, through short term interest rate, to deviations of inflation rate and output from their respective targets, while asset prices are responded to the extent they contribute to these deviations. This practice significantly affects transmission of asset prices into goods prices, which has serious implications for income distribution. This paper sets the objectives of estimating transmission of asset prices into goods prices and the role of monetary policy in influencing this transmission. In this regard, the paper hypothesizes that inflation rate positively responds to asset prices and this response weakens if interest rate leans against the winds of inflation, output and asset prices. To test these hypotheses, we have estimated different specifications of vector autoregressive (VAR) model and impulse response functions have been found after identifying structural shocks. Data of Pakistan’s economy on inflation rate, large scale manufacturing index, interest rate and asset price index – comprising house prices, stock prices and exchange rate – are used for the time period 2000m01 to 2019m06. We find evidence in support of both hypotheses; asset price inflation positively transmits into goods price inflation and this transmission intensifies if interest rate does not respond to other variables in the model. Moreover, transmission of asset prices into inflation rate, as compared to output, is influenced more by monetary policy. Finally, we find that the transmission of exchange rate and house prices to inflation rate are very much affected by monetary policy while in case of stock prices the influence of policy is moderate.

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The Transmission Mechanism and the Role of Asset Prices in Monetary Policy

10.3386/w8617 ◽

2001 ◽

Cited By ~ 63

Author(s):

Frederic Mishkin

Keyword(s):

Monetary Policy ◽

Asset Prices ◽

Transmission Mechanism

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INVESTIGATING THE ROLE OF MONEY IN THE IDENTIFICATION OF MONETARY POLICY BEHAVIOR: A BAYESIAN DSGE PERSPECTIVE

Macroeconomic Dynamics ◽

10.1017/s1365100519000762 ◽

2020 ◽

pp. 1-43

Author(s):

Bing Li ◽

Qing Liu ◽

Pei Pei

Keyword(s):

Monetary Policy ◽

Business Cycles ◽

Small Scale ◽

Model Parameters ◽

Scale Models ◽

Dynamic Stochastic ◽

The Rich ◽

Systematic Response ◽

Growth Estimation

This paper estimates an enriched version of the mainstream medium-scale dynamic stochastic general equilibrium model, which features nonseparability between consumption and real money balances in utility and a systematic response of the policy rate to money growth. Estimation results show that money is a significant factor in the monetary policy rule. As a consequence, econometric analysis that omits money from Taylor rules may lead to biased estimates of the model parameters. In contrast to earlier studies that rely on small-scale models, the paper stresses the merits of using a sufficiently rich model. First, it delivers different results, such as the role of nonseparability between consumption and money in utility. Second, the rich dynamics embedded in the model allow us to explore the responses of a larger set of macroeconomic variables, making the model more informative on the effects of shocks and more useful for understanding the sources of business cycles. Third and most importantly, it reveals the possible pitfalls of relying on small-scale models when studying money’s role in business cycles.

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