Essays on monetary policy and asset prices PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Essays on monetary policy and asset prices PDF full book. Access full book title Essays on monetary policy and asset prices by Jong Chil Son. Download full books in PDF and EPUB format.
Author: Jong Chil Son
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
Author: Jong Chil Son
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
Author: Linyan Zhu
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This dissertation consists of three essays on monetary policy and asset prices. The first chapter proposes a novel methodology to disentangle in real-time the signaling effect of a Fed announcement from exogenous monetary shocks. The method relies on the different ways monetary news and non-monetary news change the short end of the yield curve at high frequency, with the latter informed by market responses to macroeconomic data releases. The estimated revelation of Fed information is strongly correlated with the difference between market forecasts and the Fed's own forecasts. The policy shock is found to have a bigger effect on the economy than suggested using an instrument without adjustment for the signaling effect. The second chapter studies the structural forces driving the financial market responses to data releases and Fed announcements. I estimate a coherent, realistic framework that prices Treasury bonds based on macroeconomic fundamentals. The framework explicitly recognizes agents' information frictions in regard to contemporaneous aggregate outcomes, successfully matches the market responses to macroeconomic events and sheds light on the nature of news learned by investors at various events. The third chapter proposes a state-space approach to decomposing a stock's idiosyncratic volatility into a common component and an idiosyncratic one. The measure of the common idiosyncratic volatility is persistent at the daily frequency. It accounts for idiosyncratic volatilities in sample better than GARCH(1,1) and a principal component approach. It also forecasts the future levels of idiosyncratic volatilities better than GARCH(1,1) in the medium- to long-run. I assess its pricing implication in the cross section of stock returns.
Author: Alain Durré
Publisher: Presses univ. de Louvain
ISBN: 2930344296
Category : Business & Economics
Languages : fr
Pages : 188
Get Book Here
Book Description
Despite the consequences of financial bubbles on economic activity, it is still an open question to what extent the monetary policy should react to sharp fluctuations of equity prices. This dissertation attempts to contribute to the debate with some theoretical and empirical analyses of the relationship between monetary policy and financial markets. Chapter 1 incorporates the effect of real equity prices on aggregate demand in a forward-looking expectations neo-Keynesian model. This effect arises either from a wealth effect or from a change in consumers' confidence. The objective function of monetary authorities depends on the output gap and the deviation of expected inflation from the target. A numerical simulation, based on US data, illustrates the quantitative importance of the financial market channel for various exogenous shocks. In Chapter 2, the variation of equity prices enters explicitly in the loss function of the monetary authorities while, at the same time, it affects aggregate demand. This modifies the optimal monetary policy by increasing the volatility of the nominal interest rate. Chapter 3 examines how the launch of the European single currency has affected expectations on future monetary policy by comparing the econometric results of a co-integrated VAR model on pre- and post- January 1999 data. Chapter 4 deals with diverse methodological issues related to the estimation of the Taylor rule, which represents Central Bank decisions by a single and stable function. Several interesting results emerge from the modelling of the Fed funds rate over the period 1987-2002. In particular, assuming a discontinuous and asymmetric response of the Federal Reserve to fluctuations of equity prices, corrects the apparent instability of the rule.
Author: Seungduck Lee
Publisher:
ISBN: 9780355150650
Category :
Languages : en
Pages :
Get Book Here
Book Description
This dissertation analyzes the determinants of asset prices and the effect of monetary policy on not only asset prices, but also on other macroeconomic outcomes such as asset market trade volume and welfare in an environment with search frictions. The analysis in such an environment helps to examine an important component of determining asset prices: liquidity, which is assets' ability to facilitate transactions. Hence, the dissertation particularly examines the effect of monetary policy on asset prices that the traditional asset pricing models without search frictions may be missing, and also explain some phenomena which are often considered abnormal in macroeconomics and international macroeconomics such as negative nominal yields and the Uncovered Interest Parity puzzle. The dissertation consists of three stand-alone papers and I provide their abstracts as follows. The first chapter is "Money, Asset Prices and the Liquidity Premium". This paper examines the effect of monetary policy on the market value of the liquidity services that financial assets provide, known as the liquidity premium. Money supply and nominal interest rates have positive effects on the liquidity premium, but asset supply has a negative effect. This implies that liquid financial assets aresubstantive substitutes for money, and that the opportunity cost of holding money plays a key role in explaining variation in the liquidity premium and thus in asset prices. The higher cost of holding money due to higher money growth rates leads to a higher liquidity premium. My empirical analysis with U.S. Treasury data over the period from 1946 and 2008 confirms the theoretical predictions. The theory also suggests that the liquidity properties of assets can cause negative nominal yields when the cost of holding money is low and liquid assets are scarce. I present empirical findings in the U.S. and Switzerland to support this prediction. The second chapter is a joint paper with Kuk Mo Jung, titled "A Liquidity-Based Resolution of the Uncovered Interest Parity Puzzle". In this paper, a new monetary theory is set out to resolve the "Uncovered Interest Parity (UIP)" Puzzle. It explores the possibility that liquidity properties of money and nominal bonds can account for the puzzle. A key concept in our model is that nominal bondscarry liquidity premia due to their medium of exchange role as either collateral or a means of payment. In this framework, no-arbitrage ensures a positive comovement of real return on money and nominal bonds. Thus, when inflation in one country becomes relatively lower, i.e., real return on this currency is relatively higher, its nominal bonds should also yield higher real return. We show that their nominal returns can also become higher under the economic environment where collateral pledgeability and/or liquidity of nominal bonds and/or collateralized credit based transactions are relatively bigger. Since a currency with lower inflation is expected to appreciate, the high interest currency does indeed appreciate in this case, i.e., the UIP puzzle is no longer an anomaly in our model. Our liquidity based theory can in fact help understanding many empirical observations that risk based explanations find difficult to reconcile with. The third chapter is joint work with Athanasios Geromichalos, Jiwon Lee, and Keita Oikawa, titled "Over-the-Counter Trade and the Value of Assets as Collateral" and was published in Economic Theory in 2016. We study asset pricing within a general equilibrium model where unsecured credit is ruled out, and a real asset helps agents carry out mutually benecial transactions by serving as collateral. A unique feature of our model is that the agent who provides the loan might have a low valuation for the collateral asset. Nevertheless, the lender rationally chooses to accept the collateral because she can access a secondary asset market where she can sell the asset. Following a recent strand of the finance literature, based on the influential work of Duffie, Garleanu, and Pedersen (2005), we model this secondary asset market as an over-the-counter market characterized by search and bargaining frictions. We study how the asset's property to serve as collateral affects its equilibrium price, and how the asset price and the economy's welfare are affected by the degree of liquidity in the secondary asset market.
Author: John Cong Zhou
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
My dissertation is composed of three chapters that are unified by their exploration of asset prices and macroeconomic news announcements. With respect to asset prices, my main focus is on the price discovery process: how do asset prices reveal information relevant for asset fundamentals? Through my research, I provide new answers to this question. My work gets at core issues in asset pricing: whether financial markets are informationally efficient; why some assets earn unconditionally high premia; and how the sensitivity of prices to information varies over time and across assets. Specifically, chapter one shows evidence that sophisticated traders with an informational advantage inefficiently impound their edge into the aggregate U.S. stock market and U.S. Treasury bonds. In chapter two, I explore a model in which investors are averse to ambiguity (Knightian uncertainty) to explain why the equity premium is concentrated around specific events. Finally, chapter three investigates how the Federal Reserve's zero lower bound affects the response of asset prices, in particular interest rates, to information. Each of the three chapters explores the price discovery process using the unique setting of U.S. macroeconomic news announcements, which are made by government agencies and private-sector organizations and cover macroeconomic data on inflation, output, and unemployment. Analyzing financial markets in this setting deepens our understanding of how asset prices reflect information about macroeconomic fundamentals. At the same time, the results have macroeconomic implications; for example, the assumptions of monetary policy models in theory and the effectiveness of unconventional monetary policy in practice.
Author: Venoo Kakar
Publisher:
ISBN: 9781303507083
Category : Consumer credit
Languages : en
Pages : 142
Get Book Here
Book Description
This dissertation contributes to two areas of Macroeconomics: (1) welfare effects of inflation and (2) monetary policy and asset prices. The first chapter focuses on examining the redistributional effects of inflation in the United States in a cash-in-advance economy framework. Most literature on the welfare effects of inflation has largely focused on the aggregate welfare effects of inflation without much assessment about it's redistributional effects. The first chapter examines, quantitatively, how different income brackets in the U.S. would be impacted in terms of consumption and asset positions if long-run inflation were to rise
Author: Ciaran James Rogers
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
This dissertation consists of three essays that examine the effects of different monetary policy tools on the the real economy and asset prices. In Chapter 1, I study the transmission of central bank asset purchases into the real economy of the Euro Area, while Chapter 2 instead focuses on the effect of more conventional interest rate policy on asset prices and risk premia. Chapter 3 demonstrates how the pass-through of more conventional policy rate changes depends on the monetary policy framework of the central bank. In the first chapter, I study the role of local banking systems in the propagation of ECB Quantitative Easing (QE) programs. I firstly document that local deposit markets are fragmented across country lines, but the assets held by banks backing the deposits are in more integrated markets. I then consider a multi-country New Keynesian model with heterogeneous banking sectors but common monetary policy. All banks can access collateral from the same union-wide asset market, using them to back liquid deposit liabilities that are issued locally. QE has real effects if it increases the quantity or quality of collateral available to the banking sector. I find that QE has a powerful effect across the currency union, raising output and inflation by 62bps and 60bps, respectively. The pass-through is very similar across countries, despite fragmented deposit markets, as all banks face the same reduction in the cost of collateral from the union-wide asset market. The overall impact increases significantly if the beginning of QE coincides with adjusting the policy rate rule to be a weaker counteracting force by making it less responsive to inflation. In the second chapter, co-authored with Matteo Leombroni, we study the role of the household portfolio rebalancing channel for the aggregate and redistributive effects of monetary policy. The transmission of monetary policy works not only through the usual income and substitution motives, but also through an endogenous portfolio rebalancing effect that generates changes in equilibrium asset prices and a consequent wealth effect on consumption. We introduce a heterogeneous household life-cycle model with multiple assets and combine it with an incomplete markets asset pricing framework. We model monetary policy shocks as a reduction in the expected return on safe assets. In equilibrium, the reduction in bonds investment prompts a portfolio rebalancing toward riskier assets, inducing an increase in asset prices and wealth. We find that, absent wealth effects, older cohorts reduce consumption as they face lower expected asset returns, while younger cohorts raise consumption as they can borrow more cheaply. This heterogeneity remains with wealth effects, but responses turn positive for all cohorts. Asset risk premia rise because the risk compensation effect (need for more returns to hold more risk) dominates the risk tolerance effect (positive wealth effect on risky asset holdings). Shutting down household heterogeneity flips the risk premia responses negative. In the third chapter, co-authored with Monika Piazzesi and Martin Schneider, we study a New Keynesian model with a banking system. The central bank targets the interest rate on short safe bonds that are held by banks to back inside money and hence earn convenience yield for their safety or liquidity. Central bank operating procedures matter. In a floor system, the reserve rate and the quantity of reserves are independent policy tools that affect banks' cost of safety. In a corridor system, increasing the interbank rate by making reserves scarce increases banks' cost of liquidity and generates strong pass-through to other rates of return, output and inflation. In either system, policy rules that do not respond aggressively to inflation -- such as an interest rate peg -- need not lead to self-fulfilling fluctuations. The stabilizing effect from an endogenous convenience yield is stronger when there are more nominal rigidities in bank balance sheets.
Author: 張天惠
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: M. M. G. Fase
Publisher: Edward Elgar Publishing
ISBN:
Category : Business & Economics
Languages : en
Pages : 328
Get Book Here
Book Description
Presenting 25 years of empirical research on interest rates and a variety of asset prices, this text aims to deepen understanding of asset price inflation. It includes an analysis of the measurement of interest rates, with case studies from The Netherlands, Belgium and EMU, and emphasizes statistical measurement and the attempt to understand interest rate behaviour through statistical estimation. The text also includes an examination of historical interest rate development in the long run, both theoretically and empirically. The behaviour of bonds, stocks, and investment in art are analyzed, as well as the factors indispensable for a monetary strategy designed to target inflation.
Author: Emmanuil Noikokyris
Publisher:
ISBN:
Category :
Languages : en
Pages : 356
Get Book Here
Book Description
