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Working Paper
Risk Management in Monetary Policy: A Review with Asset Pricing Implications
We review recent research on how the Fed's risk-management approach shapes the overall policy stance and how it affects financial market conditions. The evidence shows that the policy stance contains a forward-looking, conditional component that has long been an integral part of the Fed's policymaking toolkit. Asymmetric forward-looking policy tilts—motivated by risk-management considerations and revealed via the Fed’s communication—complement and extend beyond the effects of direct policy actions. Drawing on the transcripts of FOMC meetings between 1976 and 2019, we provide an ...