Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212194
Authors: 
Ascari, Guido
Colciago, Andrea
Rossi, Lorenza
Year of Publication: 
2011
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 15/2011
Abstract: 
We study the design of monetary policy in an economy characterized by staggered wage and price contracts together with limited asset market participation (LAMP). Contrary to previous results, we find that once nominal wage stickiness, an incontrovertible empirical fact, is considered: i) the Taylor Principle is restored as a necessary condition for equilibrium determinacy for any empirically plausible degree of LAMP; ii) the implications of LAMP for the design of optimal monetary policy are minor; iii) optimal interest rate rules become active no matter the degree of asset market participation. For these reasons we argue that LAMP is not particularly important for monetary policy.
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-768-9
Document Type: 
Working Paper

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