Asset price bubbles and counter-cyclical monetary policy: Why central banks have been wrong and what should be done
Abstract
Central 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.Download Info
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Bibliographic Info
Article provided by Edward Elgar in its journal Intervention.
Volume (Year): 7 (2010)
Issue (Month): 1 ()
Pages: 91-107
Contact details of provider:
Web page: http://www.e-elgar.com/journals/journal_main.lasso?ref=EJEEP
Related research
Keywords: 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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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Eckhard Hein & Achim Truger & Till van Treeck, 2011. "The European Financial and Economic Crisis: Alternative Solutions from a (Post-) Keynesian Perspective," IMK Working Paper 9-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
- Hein, Eckhard & Truger, Achim, 2010.
"Finance-dominated capitalism in crisis: The case for a Global Keynesian New Deal,"
IPE Working Papers
06/2010, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
- Eckhard Hein & Achim Truger, 2012. "Finance-dominated capitalism in crisis—the case for a global Keynesian New Deal," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 35(2), pages 187-213, January.
- Hein, Eckhard & Truger, Achim, 2010. "Finance-dominated capitalism in crisis – the case for a Global Keynesian New Deal," MPRA Paper 21175, University Library of Munich, Germany.
- Daniel Detzer, 2012.
"New instruments for banking regulation and monetary policy after the crisis,"
European Journal of Economics and Economic Policies: Intervention,
Edward Elgar, vol. 9(2), pages 333-254.
- Detzer, Daniel, 2012. "New instruments for banking regulation and monetary policy after the crisis," IPE Working Papers 13/2012, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
- Hein, Eckhard, 2012.
"Finance-dominated capitalism, re-distribution and the financial and economic crises - a European perspective,"
MPRA Paper
35903, University Library of Munich, Germany.
- Hein, Eckhard, 2012. "Finance-dominated capitalism, re-distribution and the financial and economic crises: A European perspective," IPE Working Papers 14/2012, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
- Eckhard Hein, 2012. "The Crisis of Finance-dominated Capitalism in the Euro Area: Deficiencies in the Economic Policy Architecture and Deflationary Stagnation Policies," Economics Working Paper Archive wp_734, Levy Economics Institute, The.
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