Little is known about the impact of monetary policy on asset prices in emerging markets. This study applies the heteroscedasticity-based GMM for financial markets in Turkey. The results suggest that event study estimates are biased for some asset returns.

We show that growth and unemployment forecasts submitted by individual FOMC members do not exhibit herding behavior, while the inflation forecasts show strong evidence of anti-herding. Interestingly, anti-herding is more important for non-voting members than for voters.

This paper shows that monetary policy should be delegated to a central bank that cross-checks optimal policy with information from the Taylor rule. Placing some weight on deviations from a Taylor rule reduces the stabilization bias of discretionary monetary policy.

Euler equations are the key link between monetary policy and the real economy in NK models. Under separable preferences, they fail to match interest rates. Non-separability between leisure and consumption significantly improves their fit and reliability for studying monetary policy.

We challenge the view that the negative correlation between the Federal Funds and the Euler equation interest rate is linked to monetary policy. Using Monte Carlo experiments, we show that the negative correlation can be explained by risk premium disturbances.

When the yield curve is modelled using an affine factor model, residuals may still contain relevant information and do not adhere to the familiar white noise assumption. This paper proposes a pragmatic way to improve out of sample performance for yield curve forecasting. The proposed adjustment...

I explore an alternative mortgage contract that limits negative equity by tying outstanding debt to an index of house prices. This is done in an incomplete markets model, that is calibrated to match US micro- and macro-data. I find that switching from a non-recourse contract to an indexed...

We study the leading properties of 30 US high yield spreads for economic growth between 1996 and 2012 and show that they disappeared in the second half of the 2000s. Our empirical findings demonstrate the unreliability of high yield spreads as leading indicators and cast doubts on the existence...

It is well documented that the term structure of interest rates has predictive power for real economic growth. Applying the stepwise superior predictive ability test, we find that superior models contain both a short-term rate and a term spread.

With interest rates near the zero lower bound, I propose a simple framework to indicate the monetary policy stance as a “shadow short rate”. I apply a one-factor model to Japan, provide associated economic intuition, and discuss multiple-factor extensions.