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Cited by 37Monetary Policy and Economic ImpactEconomic theories and modelsFinancial Markets and Investment Strategies

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Monetary Policy and Asset Valuation

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Bianchi, Francesco, Lettau, Martin, Ludvigson, Sydney·2016·National Bureau of Economic Research
DOI 10.3386/w22572
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Abstract

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.

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Metadata

Authors
Bianchi, F., Lettau, M., & Ludvigson, S.
Affiliations
HEC Montréal (CA)
ORCID
Venue
National Bureau of Economic Research
Publisher
National Bureau of Economic Research
Published
2016-08
DOI
10.3386/w22572
OpenAlex
W2605729788
Cited by
37
References
0
Citations by year
2024: 2 · 2023: 4 · 2022: 4 · 2021: 1 · 2020: 8 · 2019: 4 · 2018: 6 · 2017: 3 · 2016: 4
Type
report
Language
en
Open access
Locations
National Bureau of Economic Research (publishedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic theories and models
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
Keywords
monetary policy, asset valuation, monetary policy transmission, macro-finance model, equity premium, asset prices

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CoChat. (2026). Citation check: Monetary Policy and Asset Valuation. https://app.cochat.ai/papers/10.3386/w22572
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Bianchi, F., Lettau, M., & Ludvigson, S. (2016). Monetary Policy and Asset Valuation. National Bureau of Economic Research. https://doi.org/10.3386/w22572