EconPapers    
Economics at your fingertips  
 

Monetary Policy Rules, Asset Prices and Exchange Rates

Jagjit Chadha (), Lucio Sarno () and Giorgio Valente ()

No 200403, CDMA Working Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: 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-cba, nep-fin, nep-ifn, nep-mac and nep-mon
Date: 2004-10-15
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (43) Track citations by RSS feed

Downloads: (external link)
http://www.st-andrews.ac.uk/~wwwecon/CDMA/papers/wp0403.pdf (application/pdf)

Related works:
Journal Article: Monetary Policy Rules, Asset Prices, and Exchange Rates (2004) Downloads
Working Paper: Monetary Policy Rules, Asset Prices and Exchange Rates (2003) Downloads
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:san:cdmawp:0403

Access Statistics for this paper

More papers in CDMA Working Paper Series from Centre for Dynamic Macroeconomic Analysis School of Economics and Finance, University of St. Andrews, Fife KY16 9AL. Contact information at EDIRC.
Series data maintained by the School of Economics ().

 
Page updated 2017-08-13
Handle: RePEc:san:cdmawp:0403