to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising …

The paper models the links between financial fragility, asset markets and monetary policy. It is shown that central … of an asset price bubble. In an economy with a highly leveraged financial structure, the central bank has an incentive to … asset prices above their fundamental value. The paper shows that the size of such a bubble is likely to be rather small. The …

, financial stability has figured highly among central banks ́objectives, with policy measures ranging from interest rate … stabilization to serving as a lender of the last resort. With the ascent of macroeconomics, these traditional tasks of central banks … fiat money system has widened the scope for central bank policies, which are no longer constrained by legal obligations …