Research Discussion Paper – RDP 2003-11 How Should Monetary Policy Respond to Asset-Price Bubbles?

Contents

• Introduction
• Model
• Results
• Discussion and Conclusions
• Appendix A: Policy Settings for a Bubble that Bursts in the Fifth Year
• Appendix B: Comparison with Kent and Lowe (1997)
• Appendix C: Analytic Solution of the Optimal Policy Problem
• Appendix D: Some Technical Results Required in Appendix C
• References

We are grateful to Glenn Stevens for a conversation that initiated this work, and to Guy Debelle, Malcolm Edey, Philip Lowe, Andrew Rose and Dave Stockton for helpful suggestions. The views expressed in this paper are those of the authors and should not be attributed to their employers.