TY  - JOUR
AU  - Mishkin,Frederic S.
TI  - The Transmission Mechanism and the Role of Asset Prices in Monetary Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8617
PY  - 2001
Y2  - December 2001
UR  - http://www.nber.org/papers/w8617
L1  - http://www.nber.org/papers/w8617.pdf
N1  - Author contact info:
Frederic S. Mishkin
Columbia University
Graduate School of Business
Uris Hall 817
3022 Broadway
New York, NY 10027
Tel: 212-854-3488
Fax: 212/662-8474
E-Mail: fsm3@columbia.edu
AB  - This paper surveys the transmission mechanisms of monetary policy beyond the standard interest rate channel by focusing on how monetary policy affects the economy through other asset prices. It outlines how the monetary transmission mechanisms operating through stock prices, real estate prices, and exchange rates affect which affect investment and consumption decisions of both firms and households. Given the role that asset prices play on the transmission mechanism, central banks have been often tempted to use them as targets of monetary policy. This paper shows that despite the significance of asset prices in the conduct of monetary policy, targeting asset prices by central banks is likely to lead to worse economic outcomes and might even erode the support for their independence.
ER  -