The Review of Economics and Statistics Vol. 102 No. 4 2020
The Time-Varying Effect of Monetary Policy on Asset Prices
open access
Abstract
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
- Issue
- 4
- Pages
- 690-704
- Language
- en
- Sources
- openalex crossref