Monetary Policy and Asset Prices: Does ‘Benign Neglect’ Make Sense?

Michael D. Bordo and Olivier Jeanne

International Finance, 2002, vol. 5, issue 2, 139-164

Abstract: The link between monetary policy and asset price movements has been of perennial interest to policy makers. In this paper we consider the potential case for pre–emptive monetary restrictions when asset price reversals can have serious effects on real output. First, we present some stylized facts on boom?bust dynamics in stock and property prices in developed economies. We then discuss the case for a pre–emptive monetary policy in the context of a stylized framework with collateral constraints in the productive sector. We find that whether such a policy is warranted depends on the economic conditions in a complex, nonlinear way. The optimal policy cannot be summarized by a simple policy rule of the type considered in the inflation–targeting literature.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://doi.org/10.1111/1468-2362.00092

Related works:
Working Paper: Monetary Policy and Asset Prices: Does "Benign Neglect" Make Sense? (2002)
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:bla:intfin:v:5:y:2002:i:2:p:139-164

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1367-0271

Access Statistics for this article

International Finance is currently edited by Benn Steil

More articles in International Finance from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().