The Bond Yield Conundrum: Alternative Hypotheses and the State of the Economy

We study the bond yield conundrum in a macro-finance framework. Building upon a exible and non-structural macro-finance model, we test the hypothesis that the bond yield conundrum is connected to various sources of uncertainty in the financial markets. Moreover we explicitly test for the role of the state of the economy. Our findings give a richer description of the drivers of the term premium yet the conun- drum remains. The results in this paper indicate that the underlying observable drivers of the term premium are not yet fully understood.affine models;yield curve;term premium;monetary policy

Can the Fed Talk the Hind Legs off the Stock Market? (replaces EBC DP 2011-017)

Abstract: Central banks infl uence financial markets' expectations of its future policy. By providing its stance on the prospects of the economy, rationalizing past decisions or announcing future actions, central banks affect financial markets' forecasts. In bad times monetary policy communication inducing an upward revision of the path of future policy is good news for stocks. During an expansion the effect is weak and on average negative. The response of equities to central bank talk depends critically on the business cycle. There are strong industry specific effects of monetary policy actions and communication. These industry effects relate to the variation in cyclicality of different industries. Firmspecific effects of monetary policy relate to the leverage, the size and the price-earnings ratio of firms.

Hawks and Doves at the FOMC

In this paper we estimate ideal points of Bank Presidents and Board Governors at the FOMC. We use stated preferences from FOMC transcripts and estimate a hierarchical spatial voting model. We find a clear difference between the average Board Governor and Bank President. We find little evidence for difference in ideal points according to the appointing president in case of Bank Governors. Similarly career background has no clear effect on the ideal points. We find that the median ideal point at the FOMC has been fairly stable over our sample period (1989-2007) emphasizing the lack of a political appointment channel. We also show that there was considerable variation in the median ideal point of Bank Presidents and Board Governors, but that these seem to cancel each other out. Also the dispersion of opinions (the spread between the lowest and highest ideal point) varies over time, suggestion variation in agreement at the FOMC

Can the Fed talk the Hind Legs off the Stock Market? (replaces CentER DP 2011-072)

Abstract: Central banks in fluence financial markets' expectations of its future policy. By providing its stance on the prospects of the economy, rationalizing past decisions or announcing future actions, central banks affect financial markets' forecasts. In bad times monetary policy communication inducing an upward revision of the path of future policy is good news for stocks. During an expansion the effect is weak and on average negative. The response of equities to central bank talk depends critically on the business cycle. There are strong industry specific effects of monetary policy actions and communication. These industry effects relate to the variation in cyclicality of different industries. Firmspecific effects of monetary policy relate to the leverage, the size and the price-earnings ratio of firms.

Estimating the Preferences of Central Bankers:An Analysis of Four Voting Records

Abstract: This paper analyzes the voting records of four central banks (Sweden, Hungary, Poland and the Czech Republic) with spatial models of voting. We infer the policy preferences of the monetary policy committee members and use these to analyze the evolution in preferences over time and the differences in preferences between member types and the position of the Governor in different monetary policy committees.