Wealth Effects and Monetary Policy

Ivo Arnold (), P.J.A. van Els and Jakob de Haan ()

WO Research Memoranda (discontinued) from Netherlands Central Bank, Research Department

Abstract: This paper explores the importance of wealth effects for monetary policy in the context of the policy strategy of the European Central Bank (ECB). Causality tests indicate that nominal equity prices have predictive power for ECB policy indicators of real activity, while housing prices have predictive power for price indicators, and money and credit aggregates. This means that, at least indirectly, monetary policy takes asset price developments into account. The results, however, point to strong differences among individual euro area countries. On the question of whether or not a central bank should explicitly target asset prices directly or through the inclusion of asset prices in its measure of inflation, counterfactual model simulations suggest that this would not have led to a significantly different macroeconomic performance in the euro area.

Keywords: Wealth effects; asset prices; monetary policy (search for similar items in EconPapers)
JEL-codes: E3 E44 E5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mon
Date: 2002
View list of references View citations in EconPapers

Downloads: (external link)
http://www.dnb.nl/binaries/wo0719_tcm46-146011.pdf (application/pdf)

Related works:
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: http://EconPapers.repec.org/RePEc:dnb:wormem:719

Access Statistics for this paper

More papers in WO Research Memoranda (discontinued) from Netherlands Central Bank, Research Department
Contact information at EDIRC.
Series data maintained by Arjen Siegmann ().