Asset Prices and Monetary Policy
The widespread liberalization of financial markets in the 1980s has increased the interest of central banks in asset developments in two ways. First, as the use of intermediate targets has become unreliable in many countries, central banks have sought other indicators to guide policy actions. A natural place to look has been various asset markets. Second, the greater role of asset prices in the monetary transmission mechanism, combined with their sustained volatility, has led to an increased concern that large changes in asset prices might disrupt economic activity and price stability as well as lead to financial fragility.
This volume collects the views of several prominent scholars and central bankers on whether and how asset price developments can be incorporated in the design of monetary policy. Related questions are: what asset price inflation means for goods and services price inflation; whether asset prices offer any guidance for monetary policy and, finally; whether asset price stability should be an explicit goal of monetary policy. These views were expressed in a concluding panel discussion of a conference on Asset Prices and Monetary Policy organized by CEPR and the BIS in January 1998.
