Working Papers

2017-09 | January 2019

More


The Time-Varying Effect of Monetary Policy on Asset Prices

Author(s):

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.

Download PDF (pdf, 7.18 mb)


Article Citation

Paul, Pascal. 2017. "The Time-Varying Effect of Monetary Policy on Asset Prices," Federal Reserve Bank of San Francisco Working Paper 2017-09. Available at https://doi.org/10.24148/wp2017-09