Monetary policy rules, asset prices, and exchange rates
UNSPECIFIED (2004) Monetary policy rules, asset prices, and exchange rates. IMF STAFF PAPERS, 51 (3). pp. 529-552. ISSN 1020-7635Full text not available from this repository.
We examine empirically whether asset prices and exchange rates may be admitted into a standard interest rate rule, using data for the United States, the United Kingdom, and Japan since 1979. Asset prices and exchange rates can be employed as information variables for a standard "Taylor-type" rule or as arguments in an augmented interest rate rule. Our empirical evidence, based on measures of the output gap proxied by marginal cost calculations, suggests that monetary policy-makers may use asset prices and exchange rates not only as part of their information set for setting interest rates, but also to set interest rates to offset deviations of asset prices or exchange rates from their equilibrium levels. These results are open to several alternative interpretations.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HG Finance
H Social Sciences > HC Economic History and Conditions
|Journal or Publication Title:||IMF STAFF PAPERS|
|Publisher:||INT MONETARY FUND|
|Number of Pages:||24|
|Page Range:||pp. 529-552|
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