Asset prices and the equity premium might reflect doubts and pessimism. Introducing these features in an otherwise standard New-Keynesian model changes in a quite substantial way the nature of the policy that maximizes the welfare of the consumers in the model. First, following productivity...

We develop a dynamic equilibrium asset pricing model with heterogeneous beliefs to study the effects of monetary policy on prices, risk premia, asset price bubbles, and financial stability. Bubble risk premia arise from an interaction between disagreements among investors and dynamic trading...

Asset prices and the equity premium might reflect doubts and pessimism. Introducing these features in an otherwise standard New-Keynesian model changes in a quite substantial way the nature of the policy that maximizes the welfare of the consumers in the model. First, following productivity...

This paper estimates the effect of the European Central Banks's monetary policy on the term structure of expected stock market risk premia. Expected stock market premia are solved using analysts' dividend forecasts, the Eurostoxx 50 stock index and Eurostoxx 50 dividend futures. Although...