Monetary policy and asset prices - implications for new EU member states

The article deals with the links between monetary policy and asset prices. Initially, it discussed opinions of the role of asset prices in the decision making process of monetary policy. In this framework is reminded the theoretical work of Alchian and Klein (1973) that shows the way, how to cover the asset price inflation in the measurement of price dynamics. Consequently, it summarises the main pro and con associated with the reaction of monetary policy to the asset price development. Empirical part covers a comparison among outputs, share indexes and credits in the selected new Member States, namely in the Czech Republic, Hungary, Poland and Slovakia. In the case of the Czech Republic I also show, how to differ the development of CPI and PPI inflation compared to the dynamics of real estate prices and share index of the Czech capital market (PX-50). Finally, I also argue that for the new EU Member States it could be very costly to include asset prices in the policy rule of the monetary policy, all the more in the objective function.