Monetary Policy and Asset Prices: Does "Benign Neglect" Make Sense?, Issues 2002-2225

Front Cover
International Monetary Fund, Dec 1, 2002 - Prices - 27 pages
0 Reviews
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.

From inside the book

What people are saying - Write a review

We haven't found any reviews in the usual places.


A Stylized Model

Other editions - View all

Common terms and phrases

Bibliographic information