Monetary policy, stock prices, and consumption externalities

Marco Airaudo ()

Economics Letters, 2013, vol. 120, issue 3, 537-541

Abstract: We study interest rate rules responding to stock prices in a sticky-price sticky-wage New-Keynesian framework subject to consumption externalities. For given wage rigidity, such rules are beneficial to equilibrium determinacy if households’ preferences feature sufficiently strong keeping-up-with-the-Joneses externalities.

Keywords: Consumption externalities; New-Keynesian model; Stock prices; Monetary policy; Determinacy (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:3:p:537-541

DOI: 10.1016/j.econlet.2013.06.015

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