On Interest Rate Policy and Asset Bubbles

Abstract

In a provocative paper, Gali (2014), showed that a policymaker who raises interest rates because of concerns about a bubble will paradoxically make the bubble bigger. In this paper, we argue Gali’s framework abstracts from the possibility that a policymaker who raises rates might crowd out resources that would have otherwise been spent on the bubble. We… (More)

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Cite this paper

@inproceedings{Allen2017OnIR, title={On Interest Rate Policy and Asset Bubbles}, author={Franklin Allen and Gadi Barlevy and Douglas Gale}, year={2017} }