Asset prices and monetary policy

• Antragsteller: Professor Dr. Alfred Maußner
• Fachliche Zuordnung: Wirtschaftspolitik, Angewandte Volkswirtschaftslehre
• Förderung: Förderung von 2012 bis 2016
• Projektkennung: Deutsche Forschungsgemeinschaft (DFG) - Projektnummer 203022323

Should central banks also target asset prices? The recent financial and economic crisis has moved this question to the forefront of the research on monetary policy. Though several papers have addressed this question the debate is unsettled. Advancing research on this topic is the goal of the projects proposed here. The first subproject develops a representative agent model that will improve existing ones. It will serve as a reliable framework for simulation studies that explore the role of asset price targeting for the volatility of the business cycle and the welfare of economic agents. The improvements will be 1) the model embeds several transmission channels of monetary policy (the interest rate channel, the financial accelerator, and the balance sheet channel) and 2) it will feature both empirically plausible asset price and business cycle statistics. The evaluation of monetary policy should not be confined to the volatility of the business cycle but should also consider the distributional effects of financial crises that trigger major adjustments in portfolios and asset prices. Therefore, a second subproject shall extend my previous work on the distributional effects of inflation. Within an overlapping generations model several additional channels of redistribution shall be explored: the role of nominal government debt, housing wealth, and unemployment that introduces individual income uncertainty.

• DFG-Verfahren: Schwerpunktprogramme
• Teilprojekt zu: SPP 1578: Finanzmärkte und Gesamtwirtschaftliche Entwicklung
• Internationaler Bezug: Italien
• Beteiligte Person: Professor Dr. Burkhard Heer