Asymmetric (S,s) Pricing: Implications for Monetary Policy

Asymmetric (S,s) pricing: implications for monetary policy

Asset Pricing and Monetary Policy∗

This paper examines the role of money in understanding the behavior of asset prices and whether and how monetary policy should react to asset prices such as stock prices and equity premiums. To do so, I introduce money via the form of transaction cost into a production economy with limited stock market participation where agents with lower inter-temporal elasticity of substitution (IES), called...

State-Dependent Pricing and Optimal Monetary Policy

Abstract: This paper analyzes optimal monetary policy under precommitment in a state-dependent pricing (SDP) environment. Under SDP, monopolistically competitive firms are allowed to endogenously change the timing of price adjustments. I show that this endogenous timing of price adjustment alters the tradeoff and the cost of inflation variation faced by the monetary authority in comparison to t...

Monetary and Fiscal Policy Dynamics in an Asymmetric Monetary Union

This paper investigates the dynamic effects of monetary and fiscal policy in a monetary union, which is characterized by asymmetric interest rate transmission. This asymmetry gives rise to intertemporal reversals in the relative effectiveness of policy on member country outputs. The direction and the number of these reversals depend on whether policies are unanticipated or anticipated. We also ...

Optimal Monetary Policy with Asymmetric Targets

Abstract: We investigate the derivation of optimal interest rate rules in a simple stochastic framework. The monetary authority chooses to minimise an asymmetric loss function made up of the sum of squared components, where the monetary authority places positive weight on squared negative (positive) deviations of output (inflation) and zero weight on squared positive (negative) deviations. Rece...