Asset price bubbles impact economy, central banks urged to prioritize stability
The article discusses how asset price bubbles can impact the economy and monetary policy. By studying the relationship between asset prices and the real economy, researchers found that asset bubbles can affect consumption and financial decisions of firms. Through simulations, it was concluded that central banks should consider both price stability and financial stability as important factors. The study suggests that central banks should not react to changes in asset prices unless they indicate changes in expected inflation of goods and services.