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Working Paper

Imperfect Capital Markets and Nominal Wage Rigidities

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Should monetary policy respond to asset prices? This paper analyzes a general equilibrium model with imperfect capital markets and rigid nominal wages. Within the context of this model, there is a natural role for the benevolent central bank to dampen the real effects of asset price movements.
06.01.2002ISSN 2573-7953 WP 02-05DOI 10.26509/frbc-wp-200205
Keywords monetary policy, agency costs
JEL Classification Codes E31, E52

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Carlstrom, Charles T., and Timothy S. Fuerst. 2002. “Imperfect Capital Markets and Nominal Wage Rigidities.” Federal Reserve Bank of Cleveland, Working Paper No. 02-05. https://doi.org/10.26509/frbc-wp-200205