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http://hdl.handle.net/2123/8187
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| Title: | Asset Prices, Monetary Policy and Determinacy |
| Authors: | Singh, Aarti Stone, Sophie School of Economics |
| Keywords: | Asset prices monetary policy determinacy financial accelerator |
| Issue Date: | Mar-2012 |
| Publisher: | School of Economics |
| Series/Report no.: | 2012-06 |
| Abstract: | We study whether central banks should respond to asset prices in their policy rules. Using a modified version of Bernanke, Gertler and Gilchrist’s (1999) model—a standard dynamic stochastic general equilibrium New Keynesian model with a financial accelerator effect—we explore how equilibrium determinacy is impacted when the central bank reacts to asset prices. Our results indicate that by reacting to asset price movements in its Taylor-type nominal interest rate feedback rule, a central bank makes determinacy of the rational expectations equilibrium more likely relative to a standard policy rule where the central bank does not react to asset prices. |
| URI: | http://hdl.handle.net/2123/8187 |
| Department/Unit/Centre: | School of Economics |
| Type of Work: | Working Paper |
| Appears in Collections: | Working Papers - Economics |
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