Ricerc@Sapienza

In the context of interest rates "too low for too long", questions regarding the neutrality of monetary policy are arising. After the Great Recession, scholars start to investigate whether the previous situation of low level of interest rates due to the dot-com bubble had some responsibilities in the excessive risk-taking behaviour of financial intermediaries, thus in the subsequent financial turmoil (Gambacorta [2009]). Once the crash of the financial markets has propagated to real economy, both the European Central Bank and the Federal Reserve intervened with unconventional loose monetary policy: massive quantitative easing and forward guidance. Nowadays, probably the greatest and unexpected shock has hit the economy and the markets: the Covid-19 pandemic. In a situation in which we already had very low (even negative) interest rates and high level of liquidity due to the responses to the previous financial crisis, Central Banks and Governments have had to intervene with other extraordinary easing policy to support the economy. Following Swanson [2017] and Kroencke et. al [2021], I will define the risky component of the monetary policy announcements that had induce investment funds reallocation towards riskier positions searching for yield (Rajan [2005]). By exploiting the data about equity funds domiciled in the US and high frequency data on monetary policy, I will estimate the impact of the announcement on asset price subsequent to funds reallocation, on GDP and inflation via a proxy VAR and a dynamic panel VAR. I want to assess whether the risk-taking channel has dominated the traditional channel, making monetary policy neutral to real economy but effective on financial markets.