Asset prices, inflation and monetary control: Re-inventing money as a policy tool

Arbeitspapier

Low inflation on goods markets provides no reliable precondition for asset-market stability; it might even promote the emergence of bubbles because interest rates and risk premia appear to be low. A further factor driving asset demand is easy availability of credit, which in turn roots in the banking system operating in a regime of endogenous central-bank money. A comparison of Bundesbank and ECB policies suggests that credit growth can be controlled more efficiently if rising interest rates are accompanied by some liquidity squeeze that supports the spillover of a monetary restriction to capital markets. The announcement effect of a central bank Charter including the goal of financial-market stability helps to deter private agents from excessive asset trading.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ROME Discussion Paper Series ; No. 10-11

Classification and Topics

• Classification: Wirtschaft
• Subject: Open market policy ; asset price bubble ; euro money market ; ECB strategy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Spahn, Peter
• Event: Veröffentlichung
• (who): Research On Money in the Economy (ROME)
• (where): s.l.
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/88235
• Last update: 10.03.2025, 11:42 AM CET