Kashyap, Anil K. and Stein, Jeremy C. <br/><br/>
Monetary policy when the central bank shapes financial-market sentiment 

 - The Journal of Economic Perspectives   
 - 37(1), winter, 2023: p.53-76 
<br/><br/> 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 draw out some implications of this tradeoff for the conduct of monetary policy.- Reproduced