Close-to-zero interest rates challenge standard economic models in which zero lower bound (ZLB) is absent. We estimate a recursive utility model which features time-varying latent expected real growth, expected inflation, and stochastic inflation volatility. Using an approximate solution to bond...

We argue that State of the Union (SOTU) addresses by the U.S. President function as announcements about broad government policies related to upcoming legislative activity of the administration. Unlike traditional macroeconomic and monetary policy announcements, SOTU addresses go back to the...

We develop a term structure model where the short interest rate and the market price of risks are subject to discrete regime shifts. Empirical evidence from Efficient Method of Moments estimation provides considerable support for the regime shifts model. Standard models, which include affine...

We document a countercyclical sensitivity of the stock market to major macroeconomic news announcements. Stock prices react more to (either good or bad) announcement surprises when the economy is below its potential trend with the expectation of easing policy. Based on comprehensive regression...

We provide strong evidence of persistent cyclical variation in the sensitivity of stock returns to macroeconomic news announcement (MNA) surprises. When the economy is significantly below trend (output gap is large and negative) and interest rates are not expected to go up, the stock return...

The Bank of Israel began planning for the coronavirus crisis even before anyone could assess the extent to which the crisis would develop. On February 2, in the entire world outside of China, there was one death as a result of the coronavirus, and just 146 verified cases of the disease. On that...