We construct a slope factor from changes in federal funds futures of different horizons. Slope predicts stock returns at the weekly frequency: faster monetary policy easing positively predicts excess returns. Investors can achieve increases in weekly Sharpe ratios of 20% conditioning on the...

We consider optimal monetary policy in a model that integrates credit frictions in the standard New Keynesian model with sticky prices and wages as well as adjustment costs of capital. Different from traditional models with credit frictions such as Carlstrom and Fuerst (1998), the model is able...

We study the impact of diverse beliefs on conduct of monetary policy. We use a New Keynesian Model solved with a quadratic approximation. Aggregation renders the belief distribution an aggregate state variable. Diverse expectations change standard results about a smooth trade-off between...

We analyze optimal monetary policy and its implications for asset prices, when aggregate demand has inertia and responds to asset prices with a lag. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (asset prices are initially pushed above their...

Conditional yield skewness is an important summary statistic of the state of the economy. It exhibits pronounced variation over the business cycle and with the stance of monetary policy, and a tight relationship with the slope of the yield curve. Most importantly, variation in yield skewness has...

We document a large return drift around monetary policy announcements by the Federal Open Market Committee. Stock returns start drifting up 25 days before expansionary monetary policy surprises, whereas they decrease before contractionary surprises. The cumulative return difference across...

We study the information flow from the ECB on policy dates since its inception, using tick data. We show that three factors capture about all of the variation in the yield curve but that these are different factors with different variance shares in the window that contains the policy decision...

This paper deals with cryptocurrency bubbles. First, it points out that a number of recent papers on cryptocurrency bubbles are awed due to an insufficient consideration of the fundamental value of cryptocurrencies. As even fiat money is said to exhibit features of bubbles, the same applies to...

Every monetary policy decision by the Reserve Bank of New Zealand (RBNZ) is accompanied by a written statement about the state of the economy and the policy outlook, but only every second decision by a published interest rate forecast. We exploit this difference to study the relative influences...

Macroeconomic news announcements are elaborate and multi-dimensional. We consider a framework in which jumps in asset prices around macroeconomic news and monetary policy announcements reflect both the response to observed surprises in headline numbers and latent factors, reflecting other...