EconPapers    
Economics at your fingertips  
 

Asset Prices, Nominal Rigidities, and Monetary Policy: Role of Price Indexation

Kengo Nutahara

MPRA Paper from University Library of Munich, Germany

Abstract: Carlstrom and Fuerst (2007) [``Asset prices, nominal rigidities, and monetary policy,'' Review of Economic Dynamics 10, 256--275] find that monetary policy response to share prices is a source of equilibrium indeterminacy because an increase in inflation implies a high real marginal cost and low share prices in a sticky-price economy. We find that if the New Keynesian Phillips curve has a lagged inflation term caused by price indexation, this effect is weakened. Moreover, equilibrium indeterminacy caused by monetary policy response to share prices never arises if all the firms that cannot re-optimize their prices follow price indexation.

Keywords: asset prices; monetary policy; equilibrium determinacy; price indexation (search for similar items in EconPapers)
JEL-codes: E32 E31 E52 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2011-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/29859/1/MPRA_paper_29859.pdf original version (application/pdf)

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:pra:mprapa:29859

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2018-12-02
Handle: RePEc:pra:mprapa:29859