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How do central banks react to wealth composition and asset prices?

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  • Castro, Vítor
  • Sousa, Ricardo M.

Abstract

We assess the response of monetary policy to developments in asset markets in the euro area, the US and the UK. We estimate the reaction of monetary policy to wealth composition and asset prices using: (i) a linear framework based on a fully simultaneous system approach in a Bayesian environment; and (ii) a nonlinear specification that relies on a smooth transition regression model.

Suggested Citation

  • Castro, Vítor & Sousa, Ricardo M., 2012. "How do central banks react to wealth composition and asset prices?," Economic Modelling, Elsevier, vol. 29(3), pages 641-653.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:3:p:641-653
    DOI: 10.1016/j.econmod.2012.01.006
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    More about this item

    Keywords

    Monetary policy rules; Wealth composition; Asset prices;
    All these keywords.

    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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