Why does the Fed move markets so much? A model of monetary policy and time-varying risk aversion

• 成果类型: Article
• 署名作者: Pflueger, Carolin; Rinaldi, Gianluca
• 署名单位: National Bureau of Economic Research; University of Chicago; Center for Economic & Policy Research (CEPR); Harvard University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2022.06.002
• 发表日期: 2022
• 页码: 71-89
• 关键词: FOMC announcement; stock return; Bond yield; habit -formation preferences; New Keynesian

摘要

We show that endogenous variation in risk aversion over the business cycle can jointly ex-plain financial market responses to high-frequency monetary policy shocks with standard asset pricing moments. We newly integrate a work-horse New Keynesian model with coun-tercyclical risk aversion via habit formation preferences. In the model, a surprise increase in the policy rate lowers consumption relative to habit, raising risk aversion. Endogenously time-varying risk aversion in the model is crucial to explain the large fall in the stock market, the cross-section of industry returns, and the increase in long-term bond yields in response to a surprise policy rate increase.(c) 2022 Elsevier B.V. All rights reserved.