TITLE:
Asset Prices, Nominal Rigidities, and Monetary Policy: Negative Monetary Policy Responses to Asset Price Fluctuations
AUTHORS:
Kengo Nutahara
KEYWORDS:
Asset Prices, Monetary Policy, Equilibrium Determinacy
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.8,
October
7,
2014
ABSTRACT: Carlstrom and
Fuerst [“Asset Prices, Nominal Rigidities, and Monetary Policy,” Review of Economic Dynamics, Vol. 10, 2007,
pp. 256-275] find that a positive monetary policy response to share prices is a
source of equilibrium indeterminacy. In this note, we investigate the negative
response of a central bank to share prices. We find that a negative monetary
policy response to share prices is also a source of equilibrium indeterminacy.