Monetary Policy and Asset Price Volatility

Ben S. Bernanke and Mark Gertler ()

No 7559, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explore the implications of asset price volatility for the management of monetary policy. We show that it is desirable for central banks to focus on underlying inflationary pressures. Asset prices become relevant only to the extent they may signal potential inflationary or deflationary forces. Rules that directly target asset prices appear to have undesirable side effects. We base our conclusions on (i) simulation of different policy rules in a small scale macro model and (ii) a comparative analysis of recent U.S. and Japanese monetary policy.

JEL-codes: E5 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fin and nep-mon
Date: 2000-02
Note: AP EFG ME
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Journal Article: Monetary policy and asset price volatility (1999)
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