Working Papers

2017-09 | July 2018


The Time-Varying Effect of Monetary Policy on Asset Prices


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.

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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