Monetary Policy Rules, Asset Prices and Exchange Rates
Jagjit Chadha (),
Lucio Sarno () and
Giorgio Valente ()
No 4114, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We examine empirically whether asset prices and exchange rates may be admitted into a standard interest rate rule, using data for the US, the UK and Japan since 1979. Asset prices and exchange rates can be employed as information variables for a standard `Taylor-type' rule or as arguments in an augmented interest rate rule. Our empirical evidence, based on measures of the output gap proxied by marginal costs calculations, suggests that monetary policy-makers may use asset prices and exchange rates not only as part of their information set for setting interest rates, but also to set interest rates to offset deviations of asset prices or exchange rates from their equilibrium levels. These results are open to several alternative interpretations.
Keywords: asset prices; exchange rates; interest rate rules; monetary policy (search for similar items in EconPapers)
JEL-codes: E40 E44 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (40) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at email@example.com
Journal Article: Monetary Policy Rules, Asset Prices, and Exchange Rates (2004)
Working Paper: Monetary Policy Rules, Asset Prices and Exchange Rates (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:4114
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=4114
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ..
Series data maintained by (). This e-mail address is bad, please contact .