Asset price bubbles and counter-cyclical monetary policy: Why central banks have been wrong and what should be done
AbstractCentral banks have generally opposed targeting asset and credit market excess. This paper argues against that position. Bubbles can impose significant harm through the debt footprint effects they leave behind, and through distortions resulting from using interest rates to mitigate their aggregate demand impacts. Conventional interest rate policy is not well suited to managing bubbles, and the paper argues for adoption of a new system of asset based reserve requirements (ABRR). Not only can ABRR target asset market excess, they also strengthen counter-cyclical monetary policy.
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Bibliographic InfoArticle provided by Edward Elgar in its journal Intervention.
Volume (Year): 7 (2010)
Issue (Month): 1 ()
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Web page: http://www.elgaronline.com/ejeep
asset price bubbles; asset based reserve requirements;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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