Can I make monetary policy respond to the total amount of loans?

[wangshiye]

Dear Professor Jifeifer, Hello:
I noticed that in the DSGE model of real estate, the central bank’s monetary policy mostly responds to output, inflation, and real estate prices. Can I make monetary policy respond to the total amount of loans? Is there any theoretical support for this? thanks for your help.@jpfeifer

[jpfeifer]

Additional components appearing in monetary policy rule

I don’t really know where the question is going. Let’s try to structure things a bit. In pure model building terms, you can put everything you want into a feedback rule. The only limit is your imagination. When it comes to the describing actual policies/central bank behavior, things will be different, because central banks may care about very specific things (which will typically differ across countries and time) Things are again different when doing a normative analysis, i.e. whether feedback…

seems relevant.

[wangshiye]

Thank you, Professor. I’m just afraid that without a theory, the paper will not pass. Thanks again, Professor.

[jpfeifer]

Again, it’s a matter of perspective, i.e. whether you want to describe actual policy of want to find a normative reason for including it.