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dc.contributor.authorZhao, Guihaien_US
dc.date.accessioned2016-12-08T19:24:42Z
dc.date.available2016-12-08T19:24:42Z
dc.date.issued2016
dc.identifier.urihttps://hdl.handle.net/2144/19568
dc.description.abstractThis dissertation addresses several outstanding puzzles in stock and bond markets, and their connections with monetary policy. In the first chapter, we show that investor confidence (size of ambiguity) about future consumption growth is driven by past consumption growth and inflation. The impact of inflation on confidence has moved considerably over time and switched on average from negative to positive in 1997. Motivated by this evidence, we develop and calibrate a model in which the confidence process has discrete regime shifts, and find that the time-varying impacts of inflation on confidence enables the model to match the bond risks over different subperiods. The model can also account for stock and bond return predictability, correlation between price-dividend ratios and inflation, and other moments. For the second chapter, in an otherwise standard New Keynesian model, we assume that the monetary authority has more information about TFP growth than the private sector. Consequently, agents in the private sector cannot fully distinguish monetary shocks from changes in TFP growth rates when the monetary authority sets interest rate according to a Taylor rule. In this environment, agents update their beliefs using a Kalman Filter. Following an expansionary monetary policy shock, agents expect a higher TFP growth today; this causes stock price, output, and labor to rise simultaneously. Mean reverting TFP growth expectation implies lower future growth expectation, which lower nominal and real bond yields and increase inflation. A calibrated version of the model does well at matching the empirical reactions of stock and bond markets to monetary shocks. Monetary shocks work like noise shocks and generate business cycle comovements among key macro variables.en_US
dc.language.isoen_US
dc.subjectEconomicsen_US
dc.titleConfidence, asset returns, and monetary policyen_US
dc.typeThesis/Dissertationen_US
dc.date.updated2016-11-09T21:42:37Z
dc.description.embargo2018-11-30
etd.degree.nameDoctor of Philosophyen_US
etd.degree.leveldoctoralen_US
etd.degree.disciplineEconomicsen_US
etd.degree.grantorBoston Universityen_US


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