Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/65793 
Authors: 
Year of Publication: 
2009
Series/Report no.: 
Cardiff Economics Working Papers No. E2009/18
Publisher: 
Cardiff University, Cardiff Business School, Cardiff
Abstract: 
I introduce behavioral asset pricing rules into a wider dynamic stochastic general equilibrium framework. Asset price bubbles emerge endogenously within the model. I find that in this model the only monetary policy that would be likely to enhance welfare is a counter-intuitive running with the wind policy. I conclude that the optimal policy is highly dependent on the nature of the behavioral rules that are stipulated. Given that monetary authorities have limited information about the ways in which agents actually behave, a systematic monetary policy response to asset price misalignments is unlikely to enhance welfare.
Document Type: 
Working Paper

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