Asset price regulators, unite: You have the macroeconomy to win and the microeconomic losses are small

Gordon Menzies, Ronald Bird, Peter Dixon, Maureen Rimmer

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    Abstract

    The global financial crisis (GFC) has rekindled debate about the desirability of governmental interference in asset markets - either through the operation of policy levers, or through the chosen institutional setup. In this article, we quantify economic costs because of mispricing of real assets in the USAGE model of the USA. The microeconomic costs of misallocated capital are small. The model suggests that regulators (or central banks) who risk mispricing by influencing asset prices do so without incurring large economic costs.
    Original languageEnglish
    Pages (from-to)449 - 464
    Number of pages16
    JournalEconomic Record
    Volume87
    Issue number278
    DOIs
    Publication statusPublished - 2011

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