Economics at your fingertips  

Monetary Policy and Asset Prices; Does "Benign Neglect" Make Sense?

Olivier Jeanne () and Michael Bordo ()

No 02/225, IMF Working Papers from International Monetary Fund

Abstract: The link between monetary policy and asset price movements has been of perennial interest to policymakers. In this paper, we consider the potential case for preemptive 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 preemptive monetary policy in the context of a stylized model. We find that the optimal policy depends on the economic conditions in a complex, nonlinear way and cannot be summarized by a simple policy rule of the type considered in the inflation-targeting literature.

Keywords: Monetary policy; Asset prices; credit crunch, Taylor rule, bubbles, new economy, inflation, monetary authorities, monetary fund, Economic History: Financial Markets and Institutions: General, International, or Comparative, (search for similar items in EconPapers)
Date: 2002-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85) Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Journal Article: Monetary Policy and Asset Prices: Does 'Benign Neglect' Make Sense? (2002) Downloads
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:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Jim Beardow ().

Page updated 2019-10-17
Handle: RePEc:imf:imfwpa:02/225