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Monetary Policy and Asset Valuation / Francesco Bianchi, Martin Lettau, Sydney C. Ludvigson.
- Format:
- Book
- Author/Creator:
- Bianchi, Francesco.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w22572.
- NBER working paper series no. w22572
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2016.
- Summary:
- We document large, longer-term, joint regime shifts in asset valuations and the real federal funds rate-r* spread. To interpret these findings, we estimate a novel macro-finance model of monetary transmission and find that the documented regimes coincide with shifts in the parameters of a policy rule, with long-term consequences for the real interest rate. Estimates imply that two-thirds of the decline in the real interest rate since the early 1980s is attributable to regime changes in monetary policy. The model explains how infrequent changes in the monetary policy stance can generate persistent changes in asset valuations and the equity premium.
- Notes:
- Print version record
- August 2016.
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