Asset Prices and Monetary Policy in a Sticky-Price Economy with Financial Frictions

Author Name NUTAHARA Kengo  (Senshu University)
Creation Date/NO. December 2010 10-E-060
Research Project Building a New Macroeconomic Model and Policies in Times of Economic Crisis
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A recent study shows that equilibrium indeterminacy arises if monetary policy responds to asset prices, especially share prices, in a sticky-price economy. We show that equilibrium indeterminacy never arise if the working capital of firms is subject to their asset values by financial frictions.