This paper analyzes the impact of unanticipated changes in the federal funds rate target on equity prices, with the aim of both estimating the size of the typical reaction and understanding the reasons for the market's response. We find that over the June 1989-December 2002 sample period, a...

Adverse shocks to the economy may be amplified by worsening credit-market conditions--the quot;financial accelerator.quot; Theoretically, we interpret the financial accelerator as resulting from endogenous changes over the business cycle in the agency costs of lending. An implication of the...