Title | Asset bubbles and monetary policy |
Authors | Dong, Feng Miao, Jianjun Wang, Pengfei |
Affiliation | Tsinghua Univ, Sch Econ & Management, Beijing, Peoples R China Boston Univ, Dept Econ, 270 Bay State Rd, Boston, MA 02215 USA Hong Kong Univ Sci & Technol, Dept Econ, Hong Kong, Peoples R China Peking Univ, HSBC Business Sch, Beijing, Peoples R China |
Keywords | GROWTH MODEL PRICES BANKS |
Issue Date | Aug-2020 |
Publisher | REVIEW OF ECONOMIC DYNAMICS |
Abstract | We provide a model of rational bubbles in a DNK framework. Entrepreneurs are heterogeneous in investment efficiency and face credit constraints. They can trade bubble assets to raise their net worth. The bubble assets command a liquidity premium and can have a positive value. Monetary policy affects the conditions for the existence of a bubble, its steady-state size, and its dynamics including the initial size. The leaning-against-the-wind interest rate policy reduces bubble volatility, but could raise inflation volatility. Whether monetary policy should respond to asset bubbles depends on the particular interest rate rule and exogenous shocks. (C) 2020 Elsevier Inc. All rights reserved. |
URI | http://hdl.handle.net/20.500.11897/591550 |
ISSN | 1094-2025 |
DOI | 10.1016/j.red.2020.06.003 |
Indexed | SSCI |
Appears in Collections: | 汇丰商学院 |