A working paper published by the Bank of Spain attempts to assess how much sectoral comovement affects the propagation of monetary policy shocks on the stock market.

In Monetary policy, stock market and sectoral comovement, Pierre Guérin and Danilo Leiva-Leon introduce a “factor-augmented vector autoregressive model with heterogeneous regime-switching factor loadings”. The authors say their paper is the first they know of to “describe and show how to estimate relatively easily” a high