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Monetary policy and asset price volatility

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  • Ben Bernanke
  • Mark Gertler

Abstract

We explore the implications of asset price volatility for the management of monetary policy. We show that it is desirable for central banks to focus on underlying inflationary pressures. Asset prices become relevant only to the extent they may signal potential inflationary or deflationary forces. Rules that directly target asset prices appear to have undesirable side effects. We base our conclusions on (i) simulation of different policy rules in a small scale macro model and (ii) a comparative analysis of recent U.S. and Japanese monetary policy.

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Bibliographic Info

Article provided by Federal Reserve Bank of Kansas City in its journal Proceedings - Economic Policy Symposium - Jackson Hole.

Volume (Year): (1999)
Issue (Month): ()
Pages: 77-128

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Handle: RePEc:fip:fedkpr:y:1999:p:77-128

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Keywords: Monetary policy ; Prices;

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  1. Maurice Obstfeld & Kenneth Rogoff, 1995. "The mirage of fixed exchange rates," Working Papers in Applied Economic Theory 95-08, Federal Reserve Bank of San Francisco.
  2. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 1999. "A Simple Model of Monetary Pollicy and Currency Crises," Working Papers 99.05, Swiss National Bank, Study Center Gerzensee.
  3. Charles Goodhart & José Viñals, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," Banco de Espa�a Working Papers 9425, Banco de Espa�a.
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  10. Charles Goodhart & José Viñals, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," Banco de Espa�a Working Papers 9425, Banco de Espa�a.
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  12. Ben Bemanke & Harold James, 1991. "The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison," NBER Chapters, in: Financial Markets and Financial Crises, pages 33-68 National Bureau of Economic Research, Inc.
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  31. repec:nbr:nberre:0126 is not listed on IDEAS
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Professor Bernanke vs Central Banker Bernanke
    by Amol Agrawal in Mostly Economics on 2010-09-27 09:53:52
  2. Accounting for the Great Recession in the UK: Real Business Cycles and Financial Frictions
    by Christian Zimmermann in NEP-DGE blog on 2012-04-25 12:15:12
  3. Accounting for the Great Recession in the UK: Real Business Cycles and Financial Frictions
    by Christian Zimmermann in NEP-DGE blog on 2012-04-25 12:15:12
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