Norway paper on Monetary policy and asset prices

A recent Bank of Norway working paper investigates whether there is a case for asset prices in interest rates rules within a small econometric model of the Norwegian economy.

The authors consider three classes of assets prices: housing prices, equity prices and the nominal exchange rate and find that including housing prices and equity prices in the policy rules can improve macroeconomic performance in terms of both nominal and real economic stability. In contrast, they argue, a response to

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