Monetary-Based Asset Pricing: A Mixed-Frequency Structural Approach

Francesco Bianchi, Sydney Ludvigson and Sai Ma

No 30072, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We integrate a high-frequency monetary event study into a mixed-frequency macro-finance model and structural estimation. The model and estimation allow for jumps at Fed announcements in investor beliefs, providing granular detail on why markets react to central bank communications. We find that the reasons involve a mix of revisions in investor beliefs about the economic state and/or future regime change in the conduct of monetary policy, and subjective reassessments of financial market risk. However, the structural estimation also finds that much of the causal impact of monetary policy on markets occurs outside of tight windows around policy announcements.

JEL-codes: E52 E58 E7 G12 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-mac and nep-mon
Note: AP EFG ME
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Working Paper: Monetary-Based Asset Pricing: A Mixed-Frequency Structural Approach (2022)
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