Year: 2000
Type: book-chapter
Abstract: This chapter examines the volatility of asset price bubbles and its implications for monetary policy. It first considers how asset prices interact with the real economy before expanding the financial accelerator model by incorporating exogenous bubbles in asset prices. It then explores how an asset bubble affects real activity via the wealth effect on consumption and firms' financial decisions via appreciations of assets on the balance sheet. Using stochastic simulations, it suggests that central banks should view price stability and financial stability as highly complementary and that central bank policies should not respond to changes in asset prices, except insofar as they signal changes in expected goods and services inflation.
Source: Oxford University Press eBooks
Authors: Ben Bernanke, Mark Gertler
Language: English
Domain: Social Sciences
Open Access status: green
Funder: National Science Foundation
OpenAlex ID: W1939907922