In the aftermath of the financial crisis, it has been argued that a guideline for future policy should be to take the 'a' out of 'asymmetry' in the way monetary policy deals with asset price movements. Recent empirical evidence has suggested that the Federal Reserve may have followed an...

This paper reexamines the main arguments of whether or not monetary policy should respond to asset bubbles. The question of how the central bank should respond to an asset bubble can be reformulated in two ways. First, how does the central bank respond while an asset bubble is growing, and...

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...

We construct a New Keynesian DSGE model that features financial frictions, investment frictions, long-run productivity risk, and Epstein and Zin (1989) preferences. The model successfully reproduces key features of both asset prices and macroeconomic quantities. Under this set up, we examine the...

This paper studies whether and how the central bank should prick asset price bubbles, if the effect of interest rate policy on bubbles can significantly vary across periods. For this purpose, I first construct a financial accelerator model with an agent-based financial market that can...

This paper analyzes the reaction of interest rates and the stock market to macroeconomic news announcements (MNAs) at the zero lower bound (ZLB). I start by using a shadow rate term structure model to formulate three predictions for the sensitivity of interest rates to MNAs. First,...

I explore the time-varying effects of the multi-dimensional aspect of monetary policy on asset prices and macroeconomic variables using a time-varying factor-augmented vector autoregressive model. I decompose monetary policy into three dimensions: current monetary policy stance, FOMC...

This paper studies the impact of different types and styles of Bank of England Monetary Policy Committee (MPC) communication on asset prices (stock prices, gilt yields and interest rate futures) from 1999-2023. We extend MPC communication to include MPC speeches and find MPC speeches to be an...

This paper studies the impact of different types and styles of Bank of England Monetary Policy Committee (MPC) communication on asset prices (stock prices, gilt yields and interest rate futures) from 1999-2023. We extend MPC communication to include MPC speeches and find MPC speeches to be an...

After a long period of loose monetary policy triggered by the Great Recession, some central banks are signaling that they will raise their policy rates soon. Previous research, for example, Bernanke and Kuttner (2005) and Ozdagli (2014), has shown that asset prices react more strongly to...