Ph.D. Candidate in Finance
University of Wisconsin–Madison, Wisconsin School of Business
I am on the job market 2025–26
This paper provides empirical evidence that the effectiveness of monetary policy transmission depends negatively on volatility and develops a general equilibrium model to quantify this relationship. In the cross section, firms with higher return volatility exhibit weaker responses to monetary policy shocks in both capital investment and equity prices. Similarly, in the time series, the stock market and aggregate investment are less responsive to monetary policy shocks when aggregate volatility is high. The key economic mechanism that determines investment on financial markets is the risk-return tradeoff. When volatility is high, investors are less sensitive to changes in expected returns. I develop a two-sector general equilibrium model with price rigidity and endogenous growth to quantify the relationship between volatility and the strength of monetary policy transmission.
Inflation risk premium is hard to identify in the data, because inflation induced by real shocks and that by nominal shocks carry risk premiums with opposite signs. We show that in the Calvo model of price rigidity, a firm's exposure to inflation risk—induced by monetary policy—is a monotonic function of its profit margin. Using profit margin sorted portfolios around pre-scheduled FOMC announcements, we identify an inflation risk premium from the cross-section of equity returns that supports the Calvo mechanism of price adjustment. We also develop a continuous-time Calvo model to guide our empirical analysis and provide an explanation for the inflation risk premium observed in the data.
A significant fraction of measured surprise central bank interest rate hikes is associated with simultaneous stock market run-ups and upward revisions in economic growth forecasts. This evidence is often interpreted as contradicting the standard New Keynesian transmission mechanism and as indicating that the Fed possesses superior information about economic fundamentals. We present a New Keynesian model in which investors are uncertain about the Fed's long-run monetary policy objectives and learn from observed Fed actions. Our model does not assume that the Fed has superior information, but it nonetheless generates a "Fed information effect," that is, a positive co-movement between interest rate surprises, revisions in expected growth, and stock returns as an equilibrium outcome. We show that the key predictions of our model are consistent with empirical evidence on asset market responses to measured Fed information shocks.