Are financial markets less responsive to monetary policy shocks at the zero lower bound?

This paper investigates the time-varying effect of monetary policy shocks on financial markets. We show that the corporate bond market is highly responsive to monetary policy shocks throughout 2000-2012, implying a high pass-through of policy-induced movements in Treasury yields to private yields even during the zero lower bound period. While the long-term Treasury bond market is highly sensitive to monetary policy shocks throughout almost the entire sample, the short-term Treasury bond market is severely constrained by the zero lower bound. The stock market is less responsive from 2008 to 2010, but the responsiveness bounces back rapidly in 2011. (C) 2016 Elsevier B.V. All rights reserved.