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Professors Giovanni Giusti (Tecnocampus), Jordi Galí (CREI) and Charles Noussair (University of Arizona) publish a scientific paper on the effects of monetary policy on speculative bubbles.

The global financial crisis of 2007-2008 and the ensuing great recession, commonly attributed to the bursting of the housing bubble in several countries, have shown how detrimental the effects of a collapse in asset prices can be. to the real economy.

This episode has renewed the debate on the stance that central banks should take in response to a growing speculative bubble and many authors and policymakers are bet for a stronger role of central banks in preventing the prices of overvalued assets through l'monetary strategy "Leaning Against the Wind". Such a policy specifies that the interest rate be raised in response to price increases on assets that are considered purely speculative. The rationale for these policies is that higher interest rates increase the opportunity cost of maintaining an inflated asset, en reduce demand and, as a consequence, reduce the size of the bubble.

By means of a laboratory experiment, the three researchers study the effects that this type of monetary policy has on a financial market. One of the main results they get shows that a type of policy based on raising the interest rate in response to a sharp rise in prices has the effect of reducing the size of the bubble in the short term. However, they also find that in the medium term the effect is the opposite and conclude with some recommendations for central banks in light of the results obtained.

The article entitled "Monetary Policy and Asset Price Bubbles: A Laboratory Experiment" was published in Journal of Economics Dynamics and Control, one of the leading scientific journals specializing in macroeconomics at the international level.

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