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Working Paper

Imperfect Capital Markets and Nominal Wage Rigidities

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.

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.