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Essays on the Interaction between Monetary Policy and Financial Markets
Alain Durré
Presses Universitaires du Louvain
Thèses de l'École polytechnique de Louvain
Présentation
Despite the consequences of financial bubbles on economic activity, it is
still an open question to what extent the monetary policy should react to
sharp fluctuations of equity prices. This dissertation attempts to contribute
to the debate with some theoretical and empirical analyses of the relationship
between monetary policy and financial markets.
Chapter 1 incorporates the effect of real equity prices on aggregate demand in
a forward-looking expectations neo-Keynesian model. This effect arises either
from a wealth effect or from a change in consumers' confidence. The objective
function of monetary authorities depends on the output gap and the deviation
of expected inflation from the target. A numerical simulation, based on US
data, illustrates the quantitative importance of the financial market channel
for various exogenous shocks.
In Chapter 2, the variation of equity prices enters explicitly in the loss
function of the monetary authorities while, at the same time, it affects
aggregate demand. This modifies the optimal monetary policy by increasing the
volatility of the nominal interest rate.
Chapter 3 examines how the launch of the European single currency has affected
expectations on future monetary policy by comparing the econometric results of
a co-integrated VAR model on pre- and post- January 1999 data.
Chapter 4 deals with diverse methodological issues related to the estimation
of the Taylor rule, which represents Central Bank decisions by a single and
stable function. Several interesting results emerge from the modelling of the
Fed funds rate over the period 1987-2002. In particular, assuming a
discontinuous and asymmetric response of the Federal Reserve to fluctuations
of equity prices, corrects the apparent instability of the rule.
Caractéristiques
| EAN13 | 9782930344294 |
|---|---|
| ISBN | 978-2-930344-29-4 |
| Éditeur | Presses Universitaires du Louvain |
| Date de publication | 1 janvier 2003 |
| Collection | Thèses de l'École polytechnique de Louvain |
| Nombre de pages | 173 |
| Dimensions | 16 x 2,5 cm |
| Poids | 289 g |
| Langue | français |
| Fiches UNIMARC | S'identifier |
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