Data and Code for: Monetary Policy When the Central Bank Shapes Financial-Market Sentiment

Recent research has found that monetary policy works in part by influencing the risk premiums on both traded financial-market securities and intermediated loans. Research has also shown that when risk premiums are compressed, there is an increased likelihood of a reversal that damages the credit-supply mechanism and the real economy. Together these effects create an intertemporal tradeoff for monetary policy, as stimulating the economy today can sow the seeds of a future downturn that might be difficult to offset. We introduce a simple model of this tradeoff and draw out its implications for the conduct of monetary policy.

Geographic Coverage:  United States of America, Australia, Canada, Germany, Japan, Switzerland, United Kingdom

Time Period(s):  1990 – 2022 (Financial conditions); 1/1998 – 12/2021 (Government Bond Yields)

 Universe:   U.S. Financial conditions; Advanced Economy Government Bond Yields

Data Type(s):    aggregate data; program source code

Data Sources:    1. Advanced Economy Central Banks' websites
2. Federal Reserve Bank of St. Louis (FRED)
3. Bloomberg Terminal
4. Robert J. Shiller's website

Unit(s) of Observation:  Month, Country, Bond term

Geographic Unit:  Country