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Journal Article
Has the effect of monetary policy announcements on asset prices changed?
The Federal Reserve has increased communication about the future path of the federal funds target rate over time. The use of forward guidance as a policy tool has raised questions about changes in how it influences the economy.
Journal Article
Has the effect of monetary policy announcements on asset prices changed?
The Federal Reserve increasingly has relied on forward guidance about the future path of the federal funds rate to implement monetary policy since the federal funds target rate reached its effective lower bound. The enhanced use of forward policy guidance has drawn attention to any change in its influence on the real economy. Changes in policy guidance affect the private sector?s expectations about the future path of the federal funds rate and, in turn, affect bond yields, stock prices and asset values. Changes in asset values influence real activity through their effects on spending by ...
Working Paper
The state space representation and estimation of a time-varying parameter VAR with stochastic volatility
To capture the evolving relationship between multiple economic variables, time variation in either coefficients or volatility is often incorporated into vector autoregressions (VARs). However, allowing time variation in coefficients or volatility without restrictions on their dynamic behavior can increase the number of parameters too much, making the estimation of such a model practically infeasible. For this reason, researchers typically assume that time-varying coefficients or volatility are not directly observed but follow random processes which can be characterized by a few parameters. ...