Since the late 1980s, the Japanese has experienced tremendous rise and fall of asset prices and large fluctuations of real economic activity, while general price level has remained relatively stable. Such developments raised a question of whether monetary policy should have targeted asset prices...

Much concern has recently been expressed that both large, procyclical changes in bank assets and "credit crunches" caused by bank reluctance to expand loans during recessions contribute to economic instability. These effects are difficult to explain using the standard textbook model of deposit...

This paper shows how US monetary policy contributed to the drop in the volatility of US output fluctuations and to the decoupling of household investment from the business cycle. I estimate a model of household investment, an aggregate of non durable consumption and corporate sector investment,...