Monetary Policy and the New Economy. Between Supply Shock and Financial Bubble
AbstractThis paper deals with some issues that recently arised from the puzzling evolution of Stock Markets during the nineties, in particular from the sharp increase of equity prices on the Nasdaq. We examine the hypothesis according to which such a bullish market could be explained by investors' increasingly optimistic expectations about the 'New economy' perspectives. We then analyse to what extent the evolution of financial markets may have recently affected aggregate demand in a stronger way than in the past. Using a simple aggregate model with rational expectations, we finally show how monetary policy decisions should be influenced by such changes in the behaviour of investors and consumers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by De Boeck Université in its journal Recherches économiques de Louvain.
Volume (Year): 68 (2002)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.cairn.info/revue-recherches-economiques-de-louvain.htm
Other versions of this item:
- Eric DOR & Alain DURRE, 2002. "Monetary Policy and the New Economy : Between Supply Shock and Financial Bubble," Discussion Papers (REL - Recherches Economiques de Louvain) 2002028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boucekkine, Raouf & del Rio, Fernando & Licandro, Omar, 1999.
"Endogenous vs Exogenously Driven Fluctuations in Vintage Capital Models,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1999007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Boucekkine, Raouf & del Rio, Fernando & Licandro, Omar, 1999. "Endogenous vs Exogenously Driven Fluctuations in Vintage Capital Models," Journal of Economic Theory, Elsevier, vol. 88(1), pages 161-187, September.
- Boucekkine, Raouf & Del Rio, Fernando & Licandro, Omar, 1999. "Endogenous vs exogenously driven fluctuations in vintage capital models," CEPREMAP Working Papers (Couverture Orange) 9901, CEPREMAP.
- Smets, Frank, 1997.
"Financial Asset Prices and Monetary Policy: Theory and Evidence,"
CEPR Discussion Papers
1751, C.E.P.R. Discussion Papers.
- Frank Smets, 1997. "Financial-asset Prices and Monetary Policy: Theory and Evidence," RBA Annual Conference Volume, in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
- Frank Smets, 1997. "Financial asset prices and monetary policy: theory and evidence," BIS Working Papers 47, Bank for International Settlements.
- Timothy Cogley, 1999. "Should the Fed take deliberate steps to deflate asset price bubbles?," Economic Review, Federal Reserve Bank of San Francisco, pages 42-52.
- Martin Lettau, 2001.
"Consumption, Aggregate Wealth, and Expected Stock Returns,"
Journal of Finance,
American Finance Association, vol. 56(3), pages 815-849, 06.
- Lettau, Martin & Ludvigson, Sydney, 1999. "Consumption, Aggregate Wealth and Expected Stock Returns," CEPR Discussion Papers 2223, C.E.P.R. Discussion Papers.
- Sydney Ludvigson & Martin Lettau, 1999. "Consumption, aggregate wealth and expected stock returns," Staff Reports 77, Federal Reserve Bank of New York.
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
- repec:ner:louvai:info:hdl:2078.1/94415 is not listed on IDEAS
- Randall Morck & Andrei Shleifer & Robert W. Vishny, 1990. "The Stock Market and Investment: Is the Market a Sideshow?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 157-216.
- James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jean-Baptiste de Vathaire).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.