Record Display for the EPA National Library Catalog


Main Title Learning, monetary policy and asset prices /
Author Airaudo, Marco,
Other Authors
Author Title of a Work
Nistico, Sal,
Zanna, Luis-Felipe,
Publisher International Monetary Fund,
Year Published 2015
OCLC Number 1374070542
Subjects Monetary policy--Econometric models ; Stocks--Prices--Econometric models ; Interest rates--Econometric models ; Consumption (Economics)--Econometric models ; Cost and standard of living--Econometric models ; Computable general equilibrium models
Internet Access
Description Access URL
Full text
ProQuest Ebook Central
Library Call Number Additional Info Location Last
ELBM  HG3881.5.I58L43 2015 AWBERC Library/Cincinnati,OH 04/04/2023
Collation 33 pages : figures ; 28 cm
"January 2015." "Research Department." Includes bibliographical references (pages 31-33). Print copy of PDF.
Contents Notes
We explore the stability properties of interest rate rules granting an explicit response to stock prices in a New-Keynesian DSGE model populated by Blanchard-Yaari non-Ricardian households. The constant turnover between long-time stock holders and asset-poor newcomers generates a financial wealth channel where the wedge between current and expected future aggregate consumption is affected by the market value of financial wealth, making stock prices non-redundant for the business cycle. We find that if the financial wealth channel is sufficiently strong, responding to stock prices enlarges the policy space for which the rational expectations equilibrium is both determinate and learnable (in the E-stability sense of Evans and Honkapohja, 2001). In particular, the Taylor principle ceases to be necessary and also mildly passive policy responses to inflation lead to determinacy and E-stability. Our results appear to be more prominent in economies characterized by a lower elasticity of substitution across differentiated products and/or more rigid labor markets.--Abstract.