Monetary Policy, Redistribution, and Risk Premia

Rohan Kekre and Moritz Lenel ()
Additional contact information
Moritz Lenel: Princeton University - Bendheim Center for Finance

No 2020-02, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: We study the transmission of monetary policy through risk premia in a heterogeneous agent New Keynesian environment. Heterogeneity in households' marginal propensity to take risk (MPR) summarizes differences in portfolio choice on the margin. An unexpected reduction in the nominal interest rate redistributes to households with high MPRs, lowering risk premia and amplifying the stimulus to the real economy. Quantitatively, this mechanism rationalizes the role of news about future excess returns in driving the stock market response to monetary policy shocks.

Keywords: monetary policy; risk premia; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E44 E63 G12 (search for similar items in EconPapers)
Pages: 119 pages
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: Monetary Policy, Redistribution, and Risk Premia (2022)
Working Paper: Monetary Policy, Redistribution, and Risk Premia (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bfi:wpaper:2020-02

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