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Fear of depression - Asymmetric monetary policy with respect to asset markets

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Author Info
Hoffmann, Andreas

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Abstract

The paper suggests that during Greenspan’s incumbency the fear of depression caused the Federal Reserve to lower interest rates rapidly when asset price developments suggested a crisis potential. Whereas, when asset markets were growth-supporting, it did not raise interest rates. This asymmetry contributed to a downward-trend in interest rates which pushed US interest rates down to zero in the current crisis.

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File URL: http://mpra.ub.uni-muenchen.de/17522/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17522.

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Date of creation: 15 Sep 2009
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Handle: RePEc:pra:mprapa:17522

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Related research
Keywords: Fear of depression; Monetary policy; Taylor rule; Asset prices;

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Find related papers by JEL classification:
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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  19. Paul De Grauwe & Magdalena Polan, 2005. "Is Inflation Always and Everywhere a Monetary Phenomenon?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 107(2), pages 239-259, 06. [Downloadable!] (restricted)
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