I analyze how the introduction of financial frictions can affect the trade-off between output stabilization and inflation stability and whether, in the presence of financial frictions, the optimal outcome can be realized or approached more closely if monetary policy is allowed to react to...

We study the distributional consequences of housing price, bond price and equity price increases for Euro Area households using data from the Household Finance and Consumption Survey (HFCS). The capital gains from bond price and equity price increases turn out to be concentrated among relatively...

It would be easy to say that central banks should consider asset prices as one of the objectives to avoid boom and bust cycles, as happened in the 2007-2009 crisis; the dotcom bubble of 2001; and the Japanese boom and bust of the 1980s and 1990s. However, its implementation would be theoretically...

We study the distributional consequences of housing price, bond price and equity price increases for Euro Area households using data from the Household Finance and Consumption Survey (HFCS). The capital gains from bond price and equity price increases turn out to be concentrated among relatively...

In this paper, we investigate how the dynamic effects of excess liquidity shocks on economic activity, asset prices and inflation differ over time. We show that the impact varies considerably over time, depends on the source of increased liquidity (M1, M3-M1 or credit) and the underlying state...

It would be easy to say that central banks should consider asset prices as one of the objectives to avoid boom and bust cycles, as happened in the 2007–2009 crisis; the dotcom bubble of 2001; and the Japanese boom and bust of the 1980s and 1990s. However, its implementation would be theoretically...

Using panel data for the Euro Area countries in the period since 1972 this paper explores, in the context of a small model of the E.U. economy, the degree to which macroeconomic policy has been asymmetric. It shows in particular that monetary policy has been much more responsive to threats that...

The primary objective of this paper is to study the interaction between mon- etary policy, asset prices, and the sources of technological progress. We develop a two sector model in which ?nancial institutions promote risk sharing and ?at money alleviates trade frictions. Since the price of...

This note deals with the stability properties of an economy where the central bank is concerned with stock market developments. We introduce a Taylor rule reacting to stock price growth rates along with inflation and output gap in a New-Keynesian setup. We explore the performance of this rule...

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...