The Time-Varying Effect of Monetary Policy on Asset Prices
The Review of Economics and Statistics
2020
open access
This paper studies how monetary policy jointly affects asset prices and the real economy in the United States. I develop an estimator that uses high-frequency surprises as a proxy for the structural monetary policy shocks. This is achieved by integrating the surprises into a vector autoregressive model as an exogenous variable. I use current short-term rate surprises because these are least affected by an information effect. When allowing for time-varying model parameters, I find that compared to the response of output, the reaction of stock and house prices to monetary policy shocks was particularly low before the 2007–2009 financial crisis.
- DOI
- 10.1162/rest_a_00840
- Volume
- 102 (4)
- Pages
- 690-704
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref