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Societies for the History of Economics

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Societies for the History of Economics <[log in to unmask]>
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Michael Perelman <[log in to unmask]>
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Sat, 7 Mar 2009 15:13:59 -0500
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Cecchetti, Stephen G. et al. 2000. Asset Prices and Central Bank Policy
(Geneva: International Center for Monetary and Banking Studies.
   13: " ... central banks can improve macroeconomic performance by reacting
systematically to asset prices ....  [T]he mean reason for this is that
asset price bubbles create distortions and investment and consumption,
leading to extreme rises and falls in both output and inflation.  Raising
interest rates modestly as asset prices rise above what are estimated to be
warranted levels ... helps to smooth these fluctuations are reducing the
possibility of an asset price bubble coming into existence in the first
place."

Michael Perelman

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