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New Perspectives on Asset Price Bubbles$
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Douglas D. Evanoff, George G. Kaufman, and A. G. Malliaris

Print publication date: 2012

Print ISBN-13: 9780199844333

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780199844333.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 28 July 2021

Monetary Policy and Asset Price Volatility

Monetary Policy and Asset Price Volatility

Should We Refill the Bernanke-Gertler Prescription?

Chapter:
(p.211) Chapter 7 Monetary Policy and Asset Price Volatility
Source:
New Perspectives on Asset Price Bubbles
Author(s):

Kenneth N. Kuttner

Publisher:
Oxford University Press
DOI:10.1093/acprof:osobl/9780199844333.003.0007

This chapter comments on the paper “Monetary Policy and Asset Price Volatility,” by Ben Bernanke and Mark Gertler. In their paper, Bernanke and Gertler examine the volatility of asset price bubbles and its implications for monetary policy. The chapter analyzes the Bernanke and Gertler results in view of the financial crisis of the late 2000s. It presents two lessons from the financial crisis that challenge the Gertler-Bernanke results. First, macroeconomic stability and price stability do not guarantee financial stability. Second, because the bursting of an asset bubble can adversely affect the real macroeconomy, the central banks' financial stability mandate should not be taken lightly. The chapter discusses whether interest rate policy or macroprudential supervision and regulation should be used to address the bubble.

Keywords:   asset price bubbles, Ben Bernanke, Mark Gertler, monetary policy, financial crisis, macroeconomic stability, price stability, financial stability, macroeconomy, central banks

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