Paper #1293

Título:

Monetary policy and rational asset price bubbles

Autor:

Jordi Galí

Data:

Abril 2011

Resumen:

I examine the impact of alternative monetary policy rules on a rational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interest rates in response to a growing bubble is shown to enhance the fluctuations in the latter, through its positive effect on bubble growth. The optimal monetary policy seeks to strike a balance between stabilization of the bubble and stabilization of aggregate demand. The paper's main findings call into question the theoretical foundations of the case for "leaning against the wind" monetary policies.

Palabras clave:

monetary policy rules, stabilization policies, asset price volatility

Códigos JEL:

E44, E52

Área de investigación:

Macroeconomía y Economía Internacional

Publicado en:

American Economic Review, forthcoming

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