The monetary policy implications of behavioral asset bubbles

Arbeitspapier

I introduce behavioral asset pricing rules into a wider dynamic stochastic general equilibrium framework. Asset price bubbles emerge endogenously within the model. I find that in this model the only monetary policy that would be likely to enhance welfare is a counter-intuitive running with the wind policy. I conclude that the optimal policy is highly dependent on the nature of the behavioral rules that are stipulated. Given that monetary authorities have limited information about the ways in which agents actually behave, a systematic monetary policy response to asset price misalignments is unlikely to enhance welfare.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Cardiff Economics Working Papers ; No. E2009/18

Classification and Topics

• Classification: Wirtschaft
• Subject: Verhaltensökonomik ; Kapitalanlage ; Bubbles ; Geldpolitik

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): ap Gwilym, Rhys
• Event: Veröffentlichung
• (who): Cardiff University, Cardiff Business School
• (where): Cardiff
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/65793