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Monetary policy and asset price overshooting: a rationale for the Wall/Main Street disconnect
Caballero, Ricardo J.; Simsek, Alp - 2022
We analyze optimal monetary policy and its implications for asset prices, when aggregate demand has inertia and responds to asset prices with a lag. If there is a negative output gap, the central bank optimally overshoots aggregate asset prices (asset prices are initially pushed above their...
Persistent link: https://www.econbiz.de/10013093040
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Central Banks, Stock Markets, and the Real Economy
Caballero, Ricardo J.; Simsek, Alp - National Bureau of Economic Research - 2024
This article summarizes empirical research on the interaction between monetary policy and asset markets, and reviews our previous theoretical work that captures these interactions. We present a concise model in which monetary policy impacts the aggregate asset price, which in turn influences...
Persistent link: https://www.econbiz.de/10014468253
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Bond Premium Cyclicality and Liquidity Traps
Caramp, Nicolas - 2020
cyclicality of the bond premium. Self-fulfilling liquidity traps are associated with a counter-cyclical bond premium. Small … liquidity traps arise under a pro-cyclical bond premium and government debt is expansionary. In the data, we find evidence of a … counter-cyclical bond premium and a pro-cyclical supply of safe assets. We propose robust policies that prevent the existence …
Persistent link: https://www.econbiz.de/10012842573
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Bond premium cyclicality and liquidity traps
Caramp, Nicolas; Singh, Sanjay R. - 2020
cyclicality of the bond premium. Selfful filling liquidity traps are associated with a counter-cyclical bond premium. Small … liquidity traps arise under a pro-cyclical bond premium and government debt is expansionary. In the data, we find evidence of a … counter-cyclical bond premium and a pro-cyclical supply of safe assets. We propose robust policies that prevent the existence …
Persistent link: https://www.econbiz.de/10012154516
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Green money without inflation
De Grauwe, Paul - In: Vierteljahrshefte zur Wirtschaftsforschung 88 (2019) 2, pp. 51-54
The ECB has announced that when government and corporate bonds come to maturity in the context of its QE-program, new bonds will be bought in the market so as to keep the money stock (money base) unchanged. This creates a "window of opportunities" for the ECB. It could replace the old bonds with...
Persistent link: https://www.econbiz.de/10012154787
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The term structure of expectations and bond yields
Crump, Richard K.; Eusepi, Stefano; Mönch, Emanuel - 2016
observed government bond yields and survey-based expected average short rates. Our term premiums measured directly based on … rates, and uncover a number of important facts: 1) the bulk of the variation in medium- and long-term bond yields is driven … shocks playing the most prominent role; and 5) the secular decline of U.S. long-term bond yields over the past thirty years …
Persistent link: https://www.econbiz.de/10011477349
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Natural rate chimera and bond pricing reality
Brand, Claus; Goy, Gavin; Lemke, Wolfgang - 2021
We build a novel macro-finance model that combines a semi-structural macroeconomic module with arbitrage-free yield-curve dynamics. We estimate it for the United States and the euro area using a Bayesian approach and jointly infer the real equilibrium interest rate (r*), trend inflation (π*),...
Persistent link: https://www.econbiz.de/10012705391
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Natural rate chimera and bond pricing reality
Brand, Claus; Goy, Gavin; Lemke, Wolfgang - 2020
Incorporating arbitrage-free term-structure dynamics into a semi-structural macro-model, we jointly estimate the real equilibrium interest rate (r*), trend inflation, and term premia for the United States and the euro area, using a Bayesian approach. The natural real rate and trend inflation are...
Persistent link: https://www.econbiz.de/10012425011
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Active Taylor Rules Still Breed Sunspots : Sunspot Volatility, Risk-Premium, and the Business Cycle
Lee, Seung Joo; Dordal i Carreras, Marc - 2023
This paper demonstrates that in macroeconomic models with nominal rigidities, a global solution exists that supports an alternate equilibrium where traditional Taylor rules give rise to self-fulfilling aggregate volatility and excess risk-premium. Within the rational expectations framework, we...
Persistent link: https://www.econbiz.de/10014354223
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The macroeconomic effects of forward communication
Brubakk, Leif; Ellen, Saskia ter; Robstad, Ørjan; Xu, Hong - 2019
This paper provides an empirical assessment of the power of forward guidance at different horizons, shedding new light on the strength of the "forward guidance puzzle". Our identification strategy allows us to disentangle the change in future interest rates stemming from deviations from the...
Persistent link: https://www.econbiz.de/10012214409