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We study whether firms' expectations react to the Bank of England's monetary policy announcements by comparing the responses to the Decision Maker Panel (DMP) survey filed immediately before and after a Monetary Policy Committee (MPC) meeting. On the one hand, we find that firms' expectations and uncertainty about their own business for the most part do not respond to high-frequency monetary policy surprises. On the other hand, announced changes in the monetary policy rate induce firms to revise their price expectations, with rate hikes resulting in a reduction in price expectations and the uncertainty surrounding them.

We estimate daily linear regressions and panel VAR to study the effect of Covid-19 news on exchange rates. We find that adverse pandemic news at the country level cause an immediate, statistically significant, depreciation of the domestic currency vis-à-vis a basket of trade-weighted currencies. This effect is more pronounced for free-floating economies.

We propose an additional solution to the comovement puzzle by developing a two-sector monetary model with housing production and an input-output structure. The model generates comovement between consumption and residential investment for large range of shocks hitting the economy. Consistent with previous work, we find that our model produces highly persistence responses in aggregate consumption, aggregate output and residential investment. We show that the results are highly robust to different policy rule specifications. We find that the lower the labour shares, the higher the relative volatility of residential investment. The model with an IO structure is works under different specifications of the period utility function. We extend the model to allow for wage rigidities and show that our proposed solution can perfectly work alongside previous ones.