Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172927
Authors: 
Bassetto, Marco
Benzoni, Luca
Serrao, Trevor
Year of Publication: 
2016
Series/Report no.: 
Working Paper 2016-11
Abstract: 
We study the interplay between monetary policy and financial conditions shocks. Such shocks have a significant and similar impact on the real economy, though with different degrees of persistence. The systematic fed funds rate response to a financial shock contributes to bringing the economy back towards trend, but a zero lower bound on policy rates can prevent this from happening, with a significant cost in terms of output and investment. In a retrospective analysis of the U.S. economy over the past 20 years, we decompose the realization of economic variables into the contributions of financial, monetary policy, and other shocks.
Document Type: 
Working Paper
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