scholarly journals Asset Prices, Nominal Rigidities, and Monetary Policy: Negative Monetary Policy Responses to Asset Price Fluctuations

2014 ◽  
Vol 04 (08) ◽  
pp. 634-638
Author(s):  
Kengo Nutahara
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
Asset Price ◽  
Nominal Rigidities ◽  
Price Fluctuations ◽  
Policy Responses

scholarly journals Should Monetary Policy Respond To Asset Price Bubbles? Revisiting the Debate

2008 ◽  
Vol 206 ◽  
pp. 25-34 ◽  
Author(s):  
Sushil Wadhwani
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Asset Prices ◽  
Asset Price ◽  
Financial System ◽  
Central Banks ◽  
Macroeconomic Performance ◽  
Asset Price Bubbles ◽  
Price Bubbles ◽  
Inflation Forecasts

Recent events have highlighted the importance of asset prices to central bank decisions. We argue that, in response to asset price bubbles, central banks should ‘lean against the wind’ (LATW hereafter). Even if the bubbles themselves are not significantly affected by LATW, macroeconomic performance can be improved if monetary policy reacts to asset price misalignments over and above the reaction to fixed horizon inflation forecasts. In addition, it might reduce the probability of bubbles arising at all. This article restates the case for LATW, and reviews the debate. In particular I respond to various criticisms that have been made against LATW and briefly consider alternative policies designed to make the financial system less cyclical.

Short-Term Funding Stresses and Asset Prices: Lessons from U.S. History

FEDS Notes ◽  
2020 ◽  
Vol 2020 (2790) ◽  
Author(s):  
Colin Weiss ◽  
Keyword(s):  
Capital Markets ◽  
Federal Reserve ◽  
Asset Prices ◽  
Asset Price ◽  
Bond Markets ◽  
Short Term ◽  
Money Markets ◽  
Price Fluctuations ◽  
History Of

Recent stress episodes in U.S. short-term dollar funding markets have brought renewed attention to the functioning of these markets and how they interact with capital markets more generally. The history of U.S. money markets and stock and bond markets before the founding of the Federal Reserve offer a unique perspective on how the structure of money markets can contribute to broader asset price fluctuations.

scholarly journals Asset prices, nominal rigidities, and monetary policy

2007 ◽  
Vol 10 (2) ◽  
pp. 256-275 ◽  
Author(s):  
Charles T. Carlstrom ◽  
Timothy S. Fuerst
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
Nominal Rigidities

scholarly journals Monetary Policy Responses to Oil Price Fluctuations

2012 ◽  
Vol 60 (4) ◽  
pp. 470-504 ◽  
Author(s):  
Martin Bodenstein ◽  
Luca Guerrieri ◽  
Lutz Kilian
Keyword(s):  
Monetary Policy ◽  
Oil Price ◽  
Price Fluctuations ◽  
Policy Responses

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

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.

A NOTE ON MONETARY POLICY, ASSET PRICES, AND MODEL UNCERTAINTY

2012 ◽  
Vol 16 (5) ◽  
pp. 777-790 ◽  
Author(s):  
Meixing Dai ◽  
Eleftherios Spyromitros
Keyword(s):  
Monetary Policy ◽  
Financial Markets ◽  
Asset Prices ◽  
Inflation Rate ◽  
Asset Price ◽  
Optimal Monetary Policy ◽  
Macroeconomic Dynamics ◽  
High Preference ◽  
And Performance ◽  
The Cost

Using a macroeconomic model with asset prices, we analyze how optimal monetary policy and macroeconomic dynamics and performance are affected by a central bank's desire to be robust against model misspecifications. We show that a higher central bank preference for robustness implies a more aggressive reaction of the nominal interest rate to the expected future inflation rate and inflation shocks. The dynamic stability of the equilibrium is not modified for a sufficiently high preference for robustness. However, the speed of dynamic convergence is lower under robust control compared to a benchmark case without it and implies supplementary economic costs. Finally, an increase in the preference for robustness comes at the cost of higher macroeconomic and financial volatility in the presence of inflation shocks. It has no effect on the reaction of inflation, output gap, and asset price gap to shocks affecting goods and financial markets.

scholarly journals Asset prices - An Austrian Perspective

2021 ◽  
pp. 57-93 ◽  
Author(s):  
Philipp Bagus
Keyword(s):  
Monetary Policy ◽  
Asset Prices ◽  
Asset Price ◽  
Central Banks ◽  
Jel Classification ◽  
Austrian Economics ◽  
Business Cycle Theory ◽  
Austrian Business Cycle Theory ◽  
Price Bubble ◽  
Austrian Business Cycle

Abstract: How asset prices should be taken into account in monetary policy is a controversial question in mainstream discussion. These mainstream positions can be differentiated into two broad perspectives: the proactive and the reactive views. The proactive view advocates pricking the asset price bubble, while the reactive view argues against monetary policy targeting asset prices. In this article the relation between asset prices and the Austrian business cycle theory is examined. Following this, a critique of both the proactive and reactive views is provided and implications for monetary policy are deduced. Key words: Austrian Economics, Business Cycles, Asset Prices, Central Banks and their Policies. JEL Classification: B53, E32, E58.

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