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Inclusion of Asset Prices: An Argument for Monetary Policy and the Phillips Curve

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Mislin, A. Inclusion of Asset Prices: An Argument for Monetary Policy and the Phillips Curve. Applied Economics Quarterly, 64(3), 239-252. https://doi.org/10.3790/aeq.64.3.239
Mislin, Alexander "Inclusion of Asset Prices: An Argument for Monetary Policy and the Phillips Curve" Applied Economics Quarterly 64.3, , 239-252. https://doi.org/10.3790/aeq.64.3.239
Mislin, Alexander: Inclusion of Asset Prices: An Argument for Monetary Policy and the Phillips Curve, in: Applied Economics Quarterly, vol. 64, iss. 3, 239-252, [online] https://doi.org/10.3790/aeq.64.3.239

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Inclusion of Asset Prices: An Argument for Monetary Policy and the Phillips Curve

Mislin, Alexander

Applied Economics Quarterly, Vol. 64 (2018), Iss. 3 : pp. 239–252

1 Citations (CrossRef)

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Mislin, Alexander, Federal Ministry of Finance, Wilhelmstraße 97, 10117 Berlin, Germany.

Cited By

  1. Monetary Policy and Asset Price Gap Signal Technology in a New Keynesian Framework

    Mislin, Alexander

    The Economists’ Voice, Vol. 18 (2021), Iss. 1 P.31

    https://doi.org/10.1515/ev-2021-0003 [Citations: 0]

Abstract

Abstract

This article develops an augmented price index that includes house prices, so that the relationship between inflation and unemployment levels in the traditional Phillips curve can be better represented. This general price index may be considered complementary to the Harmonised Index of Consumer Prices (HICP) and establishes the model-theoretical basis for a new-Keynesian model that derives the conditions for a monetary policy rule in a dynamic stochastic optimization procedure. Based on a simple stochastic differential equation for augmented inflation, we show that the reaction of the central bank depends on the marginal effects on augmented inflation and the output gap of an infinitesimal change in asset prices. This analysis could be interpreted as a way of using asset prices for a general price index, being an adequate method to restore monetary credibility.

JEL classifications: E52, E58, G10

Keywords: monetary policy, asset prices, Phillips curve

Table of Contents

Section Title Page Action Price
Alexander Mislin: Inclusion of Asset Prices: An Argument for Monetary Policy and the Phillips Curve 239
Abstract 239
1. Introduction 239
2. Hypothesis and Methodology 242
3. The Model 245
4. Optimality Conditions 239
5. Conclusions 239
References 239