The Impact of Asset Prices and Their Information Value for Monetary Policy11David Mayes is director, Europe Institute, University of Auckland, private bag 92019, Auckland 1142, New Zealand: e-mail: d.mayes@auckland.ac.nz. Matti Virén is professor of economics at the University of Turku and a scientific advisor with the Bank of Finland, PO Box 160, 00101 Helsinki, Finland, e-mail: matti.viren@bof.fi. The views expressed in this paper are those of the authors and do not necessarily coincide with any that may be held by the Bank of Finland. An earlier version of this paper was presented at the North American Economics and Finance Association session in memory of Chris Paraskevopoulos, in Hawaii on July 1, 2008. We are grateful for helpful comments from George Kaufman

David Mayes and Matti Virén

The Journal of Economic Asymmetries, 2008, vol. 5, issue 2, 1-26

Abstract: Using panel data for the EU and Norway since 1970, we explore the contribution that asset prices appear to make to fluctuations in the economy, to inflation and hence to monetary policy. House prices are important in economic activity and monetary policy, but stock market prices form a weaker and less well-determined linkage, particularly since the formation of the euro area. The effects are asymmetric over the economic cycle. Using an augmented Taylor rule we show that monetary policy has not reacted much to asset prices, but long-run interest rates are clearly affected by house price inflation. Central banks could consider asset prices in deciding monetary policy.

Keywords: E21; E31; E32; E43; E52; Asset prices; Monetary policy; European Union; House prices; Stock prices (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1703494915303005
Full text for ScienceDirect subscribers only

Related works:
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:eee:joecas:v:5:y:2008:i:2:p:1-26

DOI: 10.1016/j.jeca.2008.02.001

Access Statistics for this article

The Journal of Economic Asymmetries is currently edited by A.G. Malliaris

More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Catherine Liu ().