Determinacy, stock market dynamics and monetary policy inertia

Damjan Pfajfar; Emiliano Santoro

doi:10.1016/j.econlet.2011.02.033

Determinacy, stock market dynamics and monetary policy inertia

Damjan Pfajfar, Emiliano Santoro

Department of Economics

6 Citations (Scopus)

Abstract

We study equilibrium determinacy in a New-Keynesian model where the Central Bank responds to asset prices growth. Unlike Taylor-type rules that react to asset prices, the proposed alternative does not harm dynamic stability and in certain cases promotes determinacy by inducing interest-rate inertia.

Original language	English
Journal	Economics Letters
Volume	112
Issue number	1
Pages (from-to)	7-10
Number of pages	4
ISSN	0165-1765
DOIs	https://doi.org/10.1016/j.econlet.2011.02.033
Publication status	Published - Jul 2011

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10.1016/j.econlet.2011.02.033

Cite this

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title = "Determinacy, stock market dynamics and monetary policy inertia",

abstract = " We study equilibrium determinacy in a New-Keynesian model where the Central Bank responds to asset prices growth. Unlike Taylor-type rules that react to asset prices, the proposed alternative does not harm dynamic stability and in certain cases promotes determinacy by inducing interest-rate inertia.",

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author = "Damjan Pfajfar and Emiliano Santoro",

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AU - Santoro, Emiliano

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AB - We study equilibrium determinacy in a New-Keynesian model where the Central Bank responds to asset prices growth. Unlike Taylor-type rules that react to asset prices, the proposed alternative does not harm dynamic stability and in certain cases promotes determinacy by inducing interest-rate inertia.

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KW - Monetary policy inertia

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