Asset substitutability and monetary policy: An alternative characterization

A distance function is defined for a simple portfolio choice problem and then used to express the impact on asset prices of a change in an asset stock as the sum of a substitution and a wealth effect. Substitutes and complements are defined with reference to qualtity rather than price changes. This method of characterizing asset substitutability leads to simpler and more easily interpreted results when analyzing monetary policy that does the standard approach which expresses asset price changes in terms of the price elasticities of the asset demand functions.