Optimal interest rate policy during asset price booms: The mirage of 'benign neglect'

Wolfram Berger and Ki[beta]mer, Friedrich

Economics Letters, 2008, vol. 101, issue 3, 265-267

Abstract: We show that a policy of 'benign neglect' towards an asset price boom is not a sensible option when expectations are forward-looking. Policymakers choose between a policy that cuts real interest rates and one that raises them during asset price booms.

Keywords: Monetary; policy; Asset; prices; Credit; crunch; Boom; bust; cycles; Forward-looking; behavior (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:101:y:2008:i:3:p:265-267

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