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

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  • Hoffmann, Andreas

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

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