The Brave New World of Central Banking: The Policy Challenges Posed by Asset Price Booms and Busts

Cecchetti, Stephen

The Brave New World of Central Banking: The Policy Challenges Posed by Asset Price Booms and Busts

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: At the dawn of the 21st century, property and equity ownership are spread more broadly across the population than they once were. One consequence of this is that asset price booms and crashes now have a direct impact on general welfare. The fact that bubbles distort nearly all economic decisions gives policymakers a stronger interest in asset price stability. In this essay I examine the theoretical and empirical case for the existence of equity and property bubbles, and then summarize the economic distortions that they create. The evidence suggests increasing our attention on property prices. I go on to discuss the possible policy responses, including examining the consequences of changing the way in which housing is included in standard aggregate price measures.

Keywords: . Central bank policy; equity price bubbles; housing price bubbles. (search for similar items in EconPapers)
JEL-codes: E5 G0 (search for similar items in EconPapers)
Date: 2005-12
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-mac, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: The Brave new World of Central Banking: Polcy Challenges posed by Asset Price Booms and Busts (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2005/14

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