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Asset Prices and Monetary Policy – A sticky-dispersed information model

Listed author(s):
  • Marta Areosa
  • Waldyr Areosa

We present a DSGE model with heterogeneously informed agents and two investment opportunities – stocks and bonds – to study the interaction between monetary policy and asset prices. The information is both sticky, as in Mankiw e Reis (2002), and dispersed, as in Morris e Shin (2002). This framework allows us to (i) show that variations in stock market wealth affect consumption, (ii) demonstrate that a central bank can prevent the creation of boom-bust episodes in the economy, (iii) determine the moment of a bust occurrence and (iv) study the impulse responses to dividend and informational shocks.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps285.pdf
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 285.

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Date of creation: Jul 2012
Handle: RePEc:bcb:wpaper:285
Contact details of provider: Web page: http://www.bcb.gov.br/?english

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