A representative consumer uses Bayes' law to learn about parameters of several models and to construct probabilities with which to perform ongoing model averaging. The arrival of signals induces the consumer to alter his posterior distribution over models and parameters. The consumer's...

We discover a novel monetary policy shock that has a widespread impact on aggregate financial conditions. Our shock can be summarized by the response of long-horizon yields to Federal Open Market Committee (FOMC) announcements; not only is it orthogonal to changes in the near-term path of policy...