Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said monetary policy stimulus, when done on a sufficient scale, could stop a bursting asset price bubble from causing an increase in unemployment.

“The bubble collapse has no impact on unemployment or output, given sufficiently accommodative monetary policy,” the bank president said, referring to an economic model in the text prepared for a speech today in Marseille.

Kocherlakota, who votes on monetary policy this year, qualified his remarks saying, “the paper should be viewed only as an exploration of the properties of a new economic model and, as such, containing no information about my own thinking about current policy.”

The regional chief voted with the rest of the Federal Open Market Committee last week to keep in place the Fed’s second round of large-scale Treasury purchases to stimulate growth and reduce unemployment. He said earlier this month that he sees no reason to stop the Fed’s $600 billion program and that it’s too soon for the central bank to begin withdrawing record stimulus.

“With insufficiently accommodative monetary policy -- generated perhaps by the zero lower bound on nominal interest rates -- the bubble collapse can lead to increases in unemployment,” Kocherlakota, 47, said at a conference on asset prices, credit and macroeconomic policies.

Kocherlakota has led the Minneapolis Fed since October 2009 and is former chairman of the economics department at the University of Minnesota. Kocherlakota earned his bachelor’s degree in mathematics from Princeton University and his doctorate from the University of Chicago.