Asset Prices, Inflation and Monetary Control - Re-inventing Money as a Policy Tool
AbstractLow inflation on goods markets provides no reliable precondition for asset-market stability; it might even promote the emergence of bubbles because interest rates and risk premia appear to be low. A further factor driving asset demand is easy availability of credit, which in turn roots in the banking system operating in a regime of endogenous central-bank money. A comparison of Bundesbank and ECB policies suggests that credit growth can be controlled more efficiently if rising interest rates are accompanied by some liquidity squeeze that supports the spillover of a monetary restriction to capital markets. The announcement effect of a central bank Charter including the goal of financial-market stability helps to deter private agents from excessive asset trading.
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Bibliographic InfoPaper provided by Department of Economics, University of Hohenheim, Germany in its series Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim with number 323/2010.
Length: 21 pages
Date of creation: Aug 2010
Date of revision:
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Postal: D-70593 Stuttgart
Web page: http://www.uni-hohenheim.de/institution/institut-fuer-economics-11
More information through EDIRC
open-market policy; asset-price bubble; euro money market; ECB strategy;
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-21 (All new papers)
- NEP-CBA-2010-08-21 (Central Banking)
- NEP-MAC-2010-08-21 (Macroeconomics)
- NEP-MON-2010-08-21 (Monetary Economics)
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