San Francisco Fed paper on merits of leaning against asset prices
The presence of feedback loops between asset prices and economic fluctuations makes it crucial for optimal policy to lean against asset price movements, a San Francisco Federal Reserve paper, published on Monday, says.
Sylvain Leduc and Jean-Marc Natal, the paper's authors, examine how monetary policy is conducted in the presence of endogenous feedback loops between asset prices, firms' financial health and economic activity. The authors note that while previous literature argues aggressive
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