The Fed's Reaction to Asset Prices
AbstractShould central banks react to stock market prices? This problem has become fashionable again after the bubble of the 1990s and the following recession: if the Fed had reacted earlier to con tain the sharp growth in stock prices, might macroeconomic stabilization have been achieved? We present a new set of estimates showing that the Fed did react to stock market prices in the period 1988-2003. In particular, we find a significant lagged response for both real-time data and ex post revised data, as we would expect from a stabilizing leaning-against-the-wind approach.
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Bibliographic InfoArticle provided by SIPI Spa in its journal Rivista di Politica Economica.
Volume (Year): 95 (2005)
Issue (Month): 2 (March-April)
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Find related papers by JEL classification:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- 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
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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- Vítor Castro, 2008.
"Are Central Banks following a linear or nonlinear (augmented) Taylor rule?,"
NIPE Working Papers
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- Castro, Vítor, 2008. "Are Central Banks following a linear or nonlinear (augmented) Taylor rule?," The Warwick Economics Research Paper Series (TWERPS) 872, University of Warwick, Department of Economics.
- Vítor, Castro, 2011. "Can central banks' monetary policy be described by a linear (augmented) Taylor rule or by a nonlinear rule?," Journal of Financial Stability, Elsevier, vol. 7(4), pages 228-246, December.
- Driffill, John & Rotondi, Zeno & Savona, Paolo & Zazzara, Cristiano, 2006. "Monetary policy and financial stability: What role for the futures market?," Journal of Financial Stability, Elsevier, vol. 2(1), pages 95-112, April.
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