Asset Prices and Monetary Policy – A sticky-dispersed information model

Waldyr Areosa

No 285, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: We present a DSGE model with heterogeneously informed agents and two investment opportunities – stocks and bonds – to study the interaction between monetary policy and asset prices. The information is both sticky, as in Mankiw e Reis (2002), and dispersed, as in Morris e Shin (2002). This framework allows us to (i) show that variations in stock market wealth affect consumption, (ii) demonstrate that a central bank can prevent the creation of boom-bust episodes in the economy, (iii) determine the moment of a bust occurrence and (iv) study the impulse responses to dividend and informational shocks.

Date: 2012-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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Citations: View citations in EconPapers (7)

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