Monetary policy and asset prices

The first part of this paper surveys the literature on asset prices and monetary policy. We then consider the appropriate policy response to two types of shocks that are associated with how asset prices affect the economy. The first set of shocks are the ones whose primary impact lies in the future....

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Bibliographic Details
Published in:Journal of monetary economics 2002, Vol.49 (1), p.75-97
Main Authors: Gilchrist, Simon, Leahy, John V.
Format: Article
Language:English
Subjects:
Asset prices
Asset valuation
Assets
Capital
Capital market
Economics
Finance
Monetary economics
Monetary policy
Prices
Studies
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Summary:The first part of this paper surveys the literature on asset prices and monetary policy. We then consider the appropriate policy response to two types of shocks that are associated with how asset prices affect the economy. The first set of shocks are the ones whose primary impact lies in the future. These shocks affect the economy and asset prices through expectations of future growth. The second set are shocks to net worth which directly impact the ability of firms to borrow and for consumers to lend.
ISSN:0304-3932
1873-1295
DOI:10.1016/S0304-3932(01)00093-9