Monetary Policy, Risk-Taking, and the Macroeconomy

Abstract

This paper provides new evidence for the risk-taking channel of monetary policy, using a new index of risk appetite, event-study analysis, and an SVAR with two external instruments. We document large effects of monetary policy on financial markets and the macroeconomy that are transmitted through changes in risk appetite and risk-taking.

Publication
Working paper, prepared for the Journal of Economic Perspectives