-free holdings to risky assets in the first period. The central bank reacts directly to asset price movements by selling or buying … assets to stabilize the market price. It is found that the intervention makes the risky asset's market price per share less … sensitive to information shocks, which presses the market price towards its average price thus reducing price variance. The …

quadratic objective in output and prices depends on this parameter. When price setting decisions of firms are strategic …-shaped price response and a slow reduction in output. Instead, when prices are strategic substitutes, policy tends to react …