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Monetary policy and asset price volatility

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  • Ben Bernanke
  • Mark Gertler

Abstract

Over the past twenty years the world's major central banks have been largely successful at bringing inflation under control. While it is premature to suggest that inflation is no longer an issue of great concern, it is quite conceivable that the next battles facing central bankers will lie on a different front. One development that has already concentrated the minds of policymakers is an apparent increase in financial instability, of which one important dimension is increased volatility of asset prices.> In a presentation at the Federal Reserve Banks of Kansas City's 1999 symposium, "New Challenges for Monetary Policy," Bernanke and Gertler examined the role that asset prices should play in monetary policy. They concentrated on three issues: why policymakers should care about asset price volatility, how asset price volatility affects the economy, and how monetary policy should respond to changes in asset prices.

(This abstract was borrowed from another version of this item.)

(This abstract was borrowed from another version of this item.)

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Federal Reserve Bank of Kansas City in its journal Proceedings.

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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References

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  1. Philippe AGHION & Philippe BACCHETTA & Abhijit BANERJEE, 1999. "A Simple Model of Monetary Policy and Currency Crises," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9914, Université de Lausanne, Faculté des HEC, DEEP.
  2. Frederic S. Mishkin, 1997. "The causes and propagation of financial instability : lessons for policy makers," Proceedings, Federal Reserve Bank of Kansas City, pages 55-96.
  3. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
  4. Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
  5. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  6. Charles Goodhart & José Viñals, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," Banco de España Working Papers 9425, Banco de España.
  7. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Finance and Economics Discussion Series 93-17, Board of Governors of the Federal Reserve System (U.S.).
  8. Olivier J. Blanchard & Mark W. Watson, 1983. "Bubbles, Rational Expectations and Financial Markets," NBER Working Papers 0945, National Bureau of Economic Research, Inc.
  9. Sharon Kozicki, 1999. "How useful are Taylor rules for monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-33.
  10. Jonathan A. Parker, 1999. "Spendthrift in America? On Two Decades of Decline in the U.S. Saving Rate," NBER Working Papers 7238, National Bureau of Economic Research, Inc.
  11. Lars E.O. Svensson, 1998. "Inflation Targeting as a Monetary Policy Rule," NBER Working Papers 6790, National Bureau of Economic Research, Inc.
  12. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  13. Campbell, John Y., 1999. "Asset prices, consumption, and the business cycle," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 19, pages 1231-1303 Elsevier.
  14. Simon Gilchrist & Charles Himmelberg, 1999. "Investment: Fundamentals and Finance," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 223-274 National Bureau of Economic Research, Inc.
  15. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," NBER Working Papers 5893, National Bureau of Economic Research, Inc.
  16. José Viñals & Charles Goodhart, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," FMG Special Papers sp61, Financial Markets Group.
  17. Charles A. E. Goodhart & Jose Vinals, 1994. "Strategy an tactics of monetary policy: examples from Europe and the Antipodes," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 139-194.
  18. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University.
  19. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
  20. Allen, Franklin & Gale, Douglas, 2000. "Bubbles and Crises," Economic Journal, Royal Economic Society, vol. 110(460), pages 236-55, January.
  21. 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.
  22. Sydney Ludvigson & Charles Steindel, 1998. "How important is the stock market effect on consumption?," Research Paper 9821, Federal Reserve Bank of New York.
  23. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
  24. Ben S. Bernanke & Cara S. Lown, 1991. "The Credit Crunch," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 205-248.
  25. Charles Goodhart & José Viñals, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," Banco de España Working Papers 9425, Banco de España.
  26. 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.
  27. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
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  29. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  30. Eichengreen, B. & Masson, P. & Savastano, M. & Sharma, S., 1999. "Transition Strategies and Nominal Anchors on the Road to Greater Exchange-Rate Flexibility," Princeton Essays in International Economics 213, International Economics Section, Departement of Economics Princeton University,.
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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
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