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Should central banks target stock prices? CEPS Policy Briefs. No. 171, 23 September 2008

De Grauwe, Paul. (2008) Should central banks target stock prices? CEPS Policy Briefs. No. 171, 23 September 2008. [Policy Paper]

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    Abstract

    This paper, which draws on a longer, more analytical Working Document by the same author (No. 304/September 2008), explores the question of whether central banks should target stock prices so as to prevent bubbles and crashes from occurring. It analyses how ‘leaning against the wind’ strategies, which aim to reduce the volatility of stock prices, can help in reducing volatility of output and inflation. Its finds, however, that a critical element in the success in such a strategy is the degree of credibility of the inflation-targeting regime. In the absence of such credibility, policies aiming at stabilising stock prices do not stabilise output and inflation. Paul De Grauwe is Professor of Economics at the University of Leuven and Associate Senior Fellow at CEPS.

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    Item Type: Policy Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on and consequences/reforms
    EU policies and themes > Policies & related activities > economic and financial affairs > business/private economic activity
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Policy Briefs
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 20 Apr 2009
    Page Range: p. 3
    Last Modified: 03 Apr 2012 12:22
    URI: http://aei.pitt.edu/id/eprint/9390

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