Limited asset market participation: does it really matter for monetary policy?

Guido Ascari, Andrea Colciago and Lorenza Rossi

No 15/2011, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: We study the design of monetary policy in an economy characterized by staggered wage and price contracts together with limited asset market participation (LAMP). Contrary to previous results, we find that once nominal wage stickiness, an incontrovertible empirical fact, is considered: i) the Taylor Principle is restored as a necessary condition for equilibrium determinacy for any empirically plausible degree of LAMP; ii) the implications of LAMP for the design of optimal monetary policy are minor; iii) optimal interest rate rules become active no matter the degree of asset market participation. For these reasons we argue that LAMP is not particularly important for monetary policy.

Date: 2011
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/212194/1/bof-rdp2011-015.pdf (application/pdf)

Related works:
Working Paper: Limited Asset Market Participation: Does it Really Matter for Monetary Policy? (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2011_015

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().