Asset Price Regulators, Unite: You have the Macroeconomy to Win and the Microeconomic Losses are Small

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...

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Bibliographic Details
Published inThe Economic record Vol. 87; no. 278; pp. 449 - 464
Main Authors MENZIES, GORDON, BIRD, RON, DIXON, PETER B., RIMMER, MAUREEN T.
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.09.2011
Subjects
Asset pricing
C50
Costs
crises
Economic crisis
Economic regulation
Economics
F41
Financial crisis
Financial economics
Financial institutions
Financial integration
Financial policy
Financial regulation
Financial services
Financial systems
G01
Global economy
Macroeconomics
Microeconomics
United States > US
USA
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Summary: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.
Bibliography:We wish to acknowledge the generous support of the UTS Paul Woolley Centre for Capital Market Dysfunctionality, without which this work would not have been possible. We thank Danny Yeung for invaluable research assistance.
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content type line 23
ISSN:0013-0249
1475-4932
DOI:10.1111/j.1475-4932.2010.00702.x