Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88235
Authors: 
Spahn, Peter
Year of Publication: 
2010
Series/Report no.: 
ROME Discussion Paper Series 10-11
Abstract: 
Low inflation on goods markets provides no reliable precondition for asset-market stability; it might even promote the emergence of bubbles because interest rates and risk premia appear to be low. A further factor driving asset demand is easy availability of credit, which in turn roots in the banking system operating in a regime of endogenous central-bank money. A comparison of Bundesbank and ECB policies suggests that credit growth can be controlled more efficiently if rising interest rates are accompanied by some liquidity squeeze that supports the spillover of a monetary restriction to capital markets. The announcement effect of a central bank Charter including the goal of financial-market stability helps to deter private agents from excessive asset trading.
Subjects: 
Open market policy
asset price bubble
euro money market
ECB strategy
JEL: 
E5
Document Type: 
Working Paper

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