Munich Personal RePEc Archive

Fear of depression - Asymmetric monetary policy with respect to asset markets

Hoffmann, Andreas (2009): Fear of depression - Asymmetric monetary policy with respect to asset markets.

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Abstract

The paper suggests that during Greenspan’s incumbency the fear of depression caused the Federal Reserve to lower interest rates rapidly when asset price developments suggested a crisis potential. Whereas, when asset markets were growth-supporting, it did not raise interest rates. This asymmetry contributed to a downward-trend in interest rates which pushed US interest rates down to zero in the current crisis.

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