Economics, Econometrics and Finance
4 years ago

Central banks may improve economy by reacting to asset price misalignments.

The MIT Press eBooks
Asset Prices in a Flexible Inflation Targeting Framework
Stephen G. Cecchetti, Hans Genberg, Sushil Wadhwani

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Asset prices can affect the economy, and central banks can help by reacting to big misalignments in prices like stock market bubbles. This can improve how the economy works without changing the main goal of keeping inflation stable. It's important for central banks to explain their actions well and get agreement from many people.