Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209856
Authors: 
Akram, Q. Farooq
Bårdsen, Gunnar
Eitrheim, Øyvind
Year of Publication: 
2005
Series/Report no.: 
Working Paper No. 2005/9
Abstract: 
We investigate whether there is a case for asset prices in interest rates rules within a small econometric model of the Norwegian economy, modeling the interdependence of the real economy, credit and three classes of assets prices: housing prices, equity prices and the nominal exchange rate. We compare the performance of simple and efficient interest rate rules that allow for response to movements in asset prices to the performance of more standard monetary policy rules. We find that including housing prices and equity prices in the policy rules can improve macroeconomic performance in terms of both nominal and real economic stability. In contrast, a response to nominal exchange rate fluctuations can induce excess volatility in general and prove detrimental to macroeconomic stability.
Subjects: 
monetary policy
asset prices
simple interest rate rules
econometric model
JEL: 
C51
C52
C53
E47
E52
Persistent Identifier of the first edition: 
ISBN: 
82-7553-317-1
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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