Fear of depression - Asymmetric monetary policy with respect to asset markets
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.Download Info
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17522.Length:
Date of creation: 15 Sep 2009
Date of revision:
Handle: RePEc:pra:mprapa:17522
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Keywords: Fear of depression; Monetary policy; Taylor rule; Asset prices;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; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-03 (All new papers)
- NEP-CBA-2009-10-03 (Central Banking)
- NEP-MAC-2009-10-03 (Macroeconomics)
- NEP-MON-2009-10-03 (Monetary Economics)
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