A New Keynesian Approach to Consumption Based Asset Pricing
Date
2018-09-21
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
ORCID
Type
Thesis
Degree Level
Masters
Abstract
In the decade following the global financial crisis, modern monetary theory has been forced to push the envelope via interventionist interest rate policy across geographies, and even open market asset purchases by central banks in select geographies, testing the bounds of optimal monetary policy. The unprecedented entanglement of monetary policy and asset prices alludes to a relative blind-spot in the New Keynesian literature – embedding asset pricing explicitly. The purpose of this paper is to develop an asset pricing model where monetary policy impacts real variables and thus can be analyzed – the ambition is to provide a proof-of-concept in developing a lens through which one may observe the effect monetary policy has on the real economy via symptoms observed in financial markets (e.g. risk premiums) in a paradigm consistent with modern New Keynesian theory. While asset pricing models and New Keynesian monetary models exist individually, the challenge is integrating the two concepts in an appropriate framework and interpreting the result.
Description
Keywords
New Keynesian, Asset Pricing, Macroeconomics, Economics, Finance
Citation
Degree
Master of Arts (M.A.)
Department
Economics
Program
Economics