The Time-Varying Effect of Monetary Policy on Asset Prices
Pascal Paul ()
No 2017-9, Working Paper Series from Federal Reserve Bank of San Francisco
This paper studies how monetary policy jointly affects asset prices and the real economy in the United States. To this end, 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 show analytically that this approach identifies the true relative impulse responses. When allowing for time-varying model parameters, I find that, compared to output, the response 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)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2017-05-08, Revised 2018-01-02
Note: First online version: November 2015.
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:2017-09
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