Expectations, Asset Prices, and Monetary Policy: The Role of Learning

@inproceedings{Gilchrist2006ExpectationsAP,
  title={Expectations, Asset Prices, and Monetary Policy: The Role of Learning},
  author={Simon G. Gilchrist and Masashi Saito},
  year={2006}
}
This paper studies the implications of financial market imperfections represented by a countercyclical external finance premium and the gradual recognition of changes in the drift of technology growth for the design of an interest rate rule. Asset price movements induced by changes in trend growth influence balancesheet conditions that determine the external finance premium. Such movements are magnified when the private sector is imperfectly informed regarding the trend growth rate of… CONTINUE READING

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