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Asset Prices and Monetary Policy – A sticky-dispersed information model

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  • Marta Areosa
  • Waldyr Areosa

Abstract

We present a DSGE model with heterogeneously informed agents and two investment opportunities – stocks and bonds – to study the interaction between monetary policy and asset prices. The information is both sticky, as in Mankiw e Reis (2002), and dispersed, as in Morris e Shin (2002). This framework allows us to (i) show that variations in stock market wealth affect consumption, (ii) demonstrate that a central bank can prevent the creation of boom-bust episodes in the economy, (iii) determine the moment of a bust occurrence and (iv) study the impulse responses to dividend and informational shocks.

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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 285.

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Date of creation: Jul 2012
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Handle: RePEc:bcb:wpaper:285

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Cited by:
  1. Theophilos Papadimitriou & Periklis Gogas & Benjamin M. Tabak, 2013. "Complex Networks and Banking Systems Supervision," Working Papers Series 306, Central Bank of Brazil, Research Department.
  2. Waldyr Areosa & Marta Areosa, 2012. "Information (in) Chains: information transmission through production chains," Working Papers Series 286, Central Bank of Brazil, Research Department.
  3. Bruno Martins, 2012. "Local Market Structure and Bank Competition: evidence from the Brazilian auto loan market," Working Papers Series 299, Central Bank of Brazil, Research Department.

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