The Time-Varying Effect of Monetary Policy on Asset Prices

Pascal Paul

No 2017-09, Working Paper Series from Federal Reserve Bank of San Francisco

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 2007-09 financial crisis.

JEL-codes: E43 E44 E52 E58 G12 (search for similar items in EconPapers)
Pages: 71 pages
Date: 2019-04-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: The first version of this paper was published May 8, 2017.
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Citations: View citations in EconPapers (41)

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Related works:
Journal Article: The Time-Varying Effect of Monetary Policy on Asset Prices (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2017-09

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DOI: 10.24148/wp2017-09

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