Asset Price Regulators, Unite: you have Macroeconomic Stability to Win and the Microeconomic Losses are Second-order

Gordon Menzies, Ron Bird, Peter Dixon and Maureen Rimmer

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: The Global Financial Crisis (GFC) has rekindled debate about the desirability of governmental interference in asset markets - either through the operation of policy levers, or, through the chosen institutional setup. In this paper we quantify economic costs due to mispricing of real assets in the USAGE model of the United States. The microeconomic costs of misallocated capital are second order small. The model suggests that regulators (or central banks) who risk mispricing by influencing asset prices do so without incurring large economic costs.

Keywords: Capital Misallocation; Financial crises; CGE modeling; real assets (search for similar items in EconPapers)
JEL-codes: C50 F41 G01 (search for similar items in EconPapers)
Date: 2010-07
New Economics Papers: this item is included in nep-cba and nep-reg
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Related works:
Working Paper: Asset Price Regulators Unite: You Have Macroeconomic Stability to Win and the Microeconomic Losses are Second-order (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cop:wpaper:g-205

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