As usual, these remarks reflect only my own views and are not intended to reflect those of the Federal Open Market Committee or of anyone else associated with the Federal Reserve System. Are some asset price bubbles more problematic than others?
In order to consider how monetary and other policies should address asset price bubbles, we must first examine how asset prices influence inflation and aggregate economic activity. These influences act through several channels; in particular, asset prices provide signals regarding profitable investments, affect the wealth of households, and influence the cost of capital to firms and households.