Lean Against the Wind or Float With the Storm?: Revisiting the Monetary Policy Asset Price Nexus by Means of a Novel Statistical Identification Approach

CEGE Discussion Papers, Number 354, August 2018

28 Pages Posted: 31 Aug 2018

See all articles by Helmut Herwartz

Helmut Herwartz

University of Goettingen (Gottingen)

Simone Maxand

University of Helsinki - Department of Political and Economic Studies

Hannes Rohloff

University of Goettingen (Gottingen)

Date Written: August 14, 2018

Abstract

This paper revisits the monetary policy asset price nexus employing a novel identification approach for structural VARs in a framework of non-Gaussian independent shocks. This allows us to remain “agnostic” about the contemporaneous relations between the variables. We provide empirical evidence on the U.S. economy for monetary policy shocks and shocks originating from two asset markets: Equity and housing. Our results indicate that contractionary monetary policy shocks have a mildly negative impact on both asset prices. The effect is less pronounced for equity. Moreover, we find considerable differences in the speed of monetary policy transmission among both asset classes.

JEL Classification: C32, E44, E52

Suggested Citation

Herwartz, Helmut and Maxand, Simone and Rohloff, Hannes, Lean Against the Wind or Float With the Storm?: Revisiting the Monetary Policy Asset Price Nexus by Means of a Novel Statistical Identification Approach (August 14, 2018). CEGE Discussion Papers, Number 354, August 2018. Available at SSRN: https://ssrn.com/abstract=3236914

Helmut Herwartz (Contact Author)

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Simone Maxand

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

Hannes Rohloff

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

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