Asset Prices and Federal Reserve Behavior

38 Pages Posted: 13 May 2001

See all articles by Marc D. Hayford

Marc D. Hayford

Loyola University of Chicago - Department of Economics

Date Written: May 7, 2001

Abstract

The legislated goals of monetary policy are price stability and maximum employment; asset price stability is not a direct goal of monetary policy. In setting monetary policy, does the Fed also consider the level of the stock market? This paper examines empirically if monetary policy, since the October 19, 1987 stock market crash, has been influenced by high valuations of the stock market. A close examination of the data, a careful reading of the FOMC available transcripts and various econometric estimations of an augmented Taylor rule lead to the conclusion that the Fed has accommodated the high valuations of the stock market as measured by the S&P500 Index.

Suggested Citation

Hayford, Marc D., Asset Prices and Federal Reserve Behavior (May 7, 2001). EFMA 2001 Lugano Meetings, Available at SSRN: https://ssrn.com/abstract=263170 or http://dx.doi.org/10.2139/ssrn.263170

Marc D. Hayford (Contact Author)

Loyola University of Chicago - Department of Economics ( email )

820 N. Michigan Ave.
Chicago, IL 60611
United States
312-915-6062 (Phone)
312-915-8508 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
256
Abstract Views
1,471
rank
129,932
PlumX Metrics