Abstract
Should the central bank target asset price inflation? In their 1999 paper Bernanke and Gertler claimed that price stability and financial stability are “mutually consistent objectives” in a flexible inflation targeting regime which “dictates that central banks … should not respond to changes in\r\nasset prices.” This conclusion is straightforward within their framework in which asset price inflation shows up as a factor “augmenting” the IS curve.\r\nIn this chapter, we pursue a different modeling strategy so that, in the end, asset price dynamics will be incorporated into the NK Phillips curve. We\r\nput ourselves, therefore, in the best position to obtain a significant stabilizing role for asset price targeting. It turns out, however, that inflation volatility\r\nis higher in the asset price targeting case. After all, therefore, targeting asset prices may not be a good idea.
Lingua originale | Inglese |
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Titolo della pubblicazione ospite | Monetary Policy in the Context of the Financial Crisis: New Challenges and Lessons |
Editore | Emerald Group Publishing Ltd |
Pagine | 451-496 |
Numero di pagine | 46 |
ISBN (stampa) | 978-1784417802 |
DOI | |
Stato di pubblicazione | Pubblicato - 2015 |
All Science Journal Classification (ASJC) codes
- Economia, Econometria e Finanza Generali
Keywords
- Taylor rules
- asset prices
- cost channel