Colombian paper extends Bernanke research on asset price bubbles
Results suggest central bank should not use interest rate against bubbles
A paper delivered at a Bank for International Settlements (BIS) conference in April extends a 1999 paper by Ben Bernanke and Mark Gertler, finding its results still hold when applied to a small open economy.
Bernanke and Gertler find it is suboptimal for a central bank operating in a closed economy to use its interest rate to lean against the build-up of asset price bubbles. Martha López, an economist at the Central Bank of Colombia, extends the research to include capital flows and real
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