Asset Price Regulators Unite: You Have Macroeconomic Stability to Win and the Microeconomic Losses are Second-order
AbstractThe Global Financial Crisis (GFC) has rekindled debate about the desirability of governmental interference in asset markets – either through the operation of policy levers, or, through the chosen institutional setup. In this paper we quantify economic costs due to mispricing of real assets in the USAGE model of the United States. The microeconomic costs of misallocated capital are second-order small. The model suggests that regulators (or central banks) who restrain the volatility of asset prices do so without incurring large economic costs.
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Bibliographic InfoPaper provided by The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney in its series Working Paper Series with number 5.
Length: 21 pages
Date of creation: 01 Apr 2010
Date of revision:
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financial crises; macroeconomic modeling; real assets;
Other versions of this item:
- G. Menzies & R. Bird & P. Dixon & M. Rimmer, 2010. "Asset Price Regulators, Unite: you have Macroeconomic Stability to Win and the Microeconomic Losses are Second-order," Centre of Policy Studies/IMPACT Centre Working Papers g-205, Victoria University, Centre of Policy Studies/IMPACT Centre.
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
- G01 - Financial Economics - - General - - - Financial Crises
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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- Frederic S. Mishkin & Eugene N. White, 2002.
"U.S. Stock Market Crashes and Their Aftermath: Implications for Monetary Policy,"
NBER Working Papers
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- Gadi Barlevy, 2007. "Economic theory and asset bubbles," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 44-59.
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