Asset Price Regulators, Unite: You Have Macroeconomic Stability to Win and the Microeconomic Losses are Second-order

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Menzies, G, Bird, R, Dixon, Peter and Rimmer, Maureen T (2010) Asset Price Regulators, Unite: You Have Macroeconomic Stability to Win and the Microeconomic Losses are Second-order. Working Paper. Centre of Policy Studies (COPS).

Abstract

The Global Financial Crisis (GFC) has rekindled debate about the desirability of governmental interference in asset markets – either through the operation of policy levers, or, through the chosen institutional setup. In this paper we quantify economic costs due to mispricing of real assets in the USAGE model of the United States. The microeconomic costs of misallocated capital are second-order small. The model suggests that regulators (or central banks) who restrain the volatility of asset prices do so without incurring large economic costs.

Additional Information

CoPS/IMPACT Working Paper Number G-205

Item type Monograph (Working Paper)
URI https://vuir.vu.edu.au/id/eprint/35949
Official URL https://www.copsmodels.com/elecpapr/g-205.htm
ISBN 9781921654121
Subjects Historical > FOR Classification > 1402 Applied Economics
Current > Division/Research > Centre of Policy Studies (CoPS)
Keywords C50; G01; F41; financial crises; macroeconomic modeling; real assets
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