The Monetary Policy Implications of Behavioral Asset Bubbles

• Autores: Rhys ap Gwilym
• Localización: Southern Economic Journal, ISSN 0038-4038, ISSN-e 2325-8012, Vol. 80, Nº. 1, 2013, págs. 252-270
• Idioma: inglés
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• Resumen

  • I introduce behavioral asset pricing rules into a wider dynamic stochastic general equilibrium framework. Asset price bubbles emerged endogenously within the model. I find that in this model monetary policy rules that target the mispricing of the asset have a destabilizing effect; however, a monetary policy rule that targets deviations in the price of the asset from its trend can be welfare enhancing. Such a rule would also have the benefit of being straightforward to implement.