IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/24113.html
   My bibliography  Save this paper

Asset prices and monetary policy in a sticky-price economy with financial frictions

Author

Listed:
  • Nutahara, Kengo

Abstract

A recent study shows that equilibrium indeterminacy arises if monetary policy responds to asset prices, especially share prices, in a sticky-price economy. We show that equilibrium indeterminacy never arises if the working capital of firms is subject to their asset values by financial frictions.

Suggested Citation

  • Nutahara, Kengo, 2010. "Asset prices and monetary policy in a sticky-price economy with financial frictions," MPRA Paper 24113, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24113
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/24113/1/MPRA_paper_24113.pdf
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
    2. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    3. Gilchrist, Simon & Leahy, John V., 2002. "Monetary policy and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 75-97, January.
    4. Keiichiro Kobayashi & Kengo Nutahara, 2007. "Collateralized capital and news-driven cycles," Economics Bulletin, AccessEcon, vol. 5(18), pages 1-9.
    5. Zheng Liu & Pengfei Wang & Tao Zha, 2009. "Do Credit Constraints Amplify Macroeconomic Fluctuations?," Emory Economics 0910, Department of Economics, Emory University (Atlanta).
    6. Charles T. Carlstrom & Timothy Fuerst, 2007. "Asset Prices, Nominal Rigidities, and Monetary Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(2), pages 256-275, April.
    7. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
    8. Carlstrom, Charles T & Fuerst, Timothy S, 1997. "Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis," American Economic Review, American Economic Association, vol. 87(5), pages 893-910, December.
    9. Kobayashi, Keiichiro & Nakajima, Tomoyuki & Inaba, Masaru, 2012. "Collateral Constraint And News-Driven Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 16(05), pages 752-776, November.
    10. Faia, Ester & Monacelli, Tommaso, 2007. "Optimal interest rate rules, asset prices, and credit frictions," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3228-3254, October.
    11. repec:ebl:ecbull:v:5:y:2007:i:18:p:1-9 is not listed on IDEAS
    12. Harrison, Sharon G. & Weder, Mark, 2013. "Sunspots And Credit Frictions," Macroeconomic Dynamics, Cambridge University Press, vol. 17(05), pages 1055-1069, July.
    13. Timothy S. Fuerst & Charles T. Carlstrom, 1998. "Agency costs and business cycles," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 12(3), pages 583-597.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clain-Chamosset-Yvrard, Lise & Seegmuller, Thomas, 2015. "Rational bubbles and macroeconomic fluctuations: The (de-)stabilizing role of monetary policy," Mathematical Social Sciences, Elsevier, vol. 75(C), pages 1-15.

    More about this item

    Keywords

    asset prices; financial frictions; equilibrium indeterminacy; monetary policy; sticky prices;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:24113. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.