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Financial Variables and the Conduct of Monetary Policy

1st Person: Goodhart, Charles
Additional Persons: Hofmann, Boris
Type of Publication: Paper
Language: English
Published: Sveriges Riksbank 2000
Series: Sveriges Riksbank Working Paper Series
Online: https://www.econstor.eu/bitstream/10419/82468/1/wp_112.pdf
id
oai_econstor.eu_10419-82468
recordtype
econstor
institution
MPG
collection
ECONSTOR
title
Financial Variables and the Conduct of Monetary Policy
spellingShingle
Financial Variables and the Conduct of Monetary Policy
Goodhart, Charles
Sveriges Riksbank Working Paper Series
title_short
Financial Variables and the Conduct of Monetary Policy
title_full
Financial Variables and the Conduct of Monetary Policy
title_fullStr
Financial Variables and the Conduct of Monetary Policy
title_full_unstemmed
Financial Variables and the Conduct of Monetary Policy
title_sort
Financial Variables and the Conduct of Monetary Policy
format
electronic Article
format_phy_str_mv
Paper
publisher
Sveriges Riksbank
publishDate
2000
language
English
author
Goodhart, Charles
author2
Hofmann, Boris
author2Str
Hofmann, Boris
description
This paper analyses the role of financial variables in the conduct of monetary policy. In the baseline model for the analysis of interest rules, the inflation rate depends on the output gap, which is solely determined by its own lags and the lagged short-term real interest rate. However, from a theoretical point of view there are several other financial variables which may affect aggregate demand, and should therefore be taken into account in the estimation of an output gap equation. In order to assess the importance of financial variables such as asset prices and monetary aggregates for aggregate demand, we estimate a small structural model for 17 developed countries using quarterly data spanning 1973 - 1998. The results indicate that the effect of other financial variables, especially property and share prices, on the output gap is highly significant. It appears that in almost all of the countries in our data set it is necessary to control for the effect of other financial variables on the output gap in order to find a significant effect for monetary policy.
url
https://www.econstor.eu/bitstream/10419/82468/1/wp_112.pdf
series
Sveriges Riksbank Working Paper Series
seriesStr
Sveriges Riksbank Working Paper Series
Sveriges Riksbank Working Paper Series
series2
Sveriges Riksbank Working Paper Series
series2_facet
Sveriges Riksbank Working Paper Series
up_date
2019-04-25T02:50:14.388Z
_version_
1631752697232228353

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