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Determinacy, stock market dynamics and monetary policy inertia

  • Pfajfar, Damjan
  • Santoro, Emiliano

We study equilibrium determinacy in a New-Keynesian model where the Central Bank responds to asset prices growth. Unlike Taylor-type rules that react to asset prices, the proposed alternative does not harm dynamic stability and in certain cases promotes determinacy by inducing interest-rate inertia.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 112 (2011)
Issue (Month): 1 (July)
Pages: 7-10

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Handle: RePEc:eee:ecolet:v:112:y:2011:i:1:p:7-10
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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