English, Article, Journal or magazine article edition: Stock Prices, Exchange Rates and Monetary Policy Dor, Eric; DurrŽ, Alain

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Bookmark: http://trove.nla.gov.au/version/178698
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Stock Prices, Exchange Rates and Monetary Policy
Author
  • Dor, Eric
  • DurrŽ, Alain
Physical Description
  • preprint
Notes
  • This paper attempts to model the relationship between monetary policy and financial asset prices. We develop an aggregative model under forward-looking rational expectations to analyse the optimal monetary policy response to stock prices and exchange rates shocks. We first demonstrate that a model ignoring the impact of equity prices and exchange rates on aggregate demand leads to an overestimation of the optimal policy response to standard shocks. Second, we clearly point out that a correct assessment of the relation between optimal monetary policy and either equity prices or exchange rates necessitates a model including both kinds of financial prices simultaneously. Third, we show how these interactions between financial asset prices and monetary policy are affected by a particular form of coordination between monetary policy and fiscal policy, arising from a public debt solvency constraint.
  • Monetary policy; financial asset prices; monetary conditions indicator
  • RePEc:ctl:louvir:2000001
Language
  • English
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