The Risk Premium in New Keynesian DSGE Models : The Cost of Inflation Channel

We study the role of the cost of inflation channel in determining the risk premium in a (nonlinear) New Keynesian DSGE model. Relying on a Calvo (or Rotemberg) price setting, we show that while the cost of inflation channel generates the desired term premium moments, it suffers from nontrivial, counterintuitive approximation errors in the price dispersion function. In addition to documenting the issues, we propose ways to alleviate them, in cluding a quasikinked demand function as a risk-generating mechanism

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Year of publication:	2022
Authors:	Iania, Leonardo ; Tretiakov, Pavel ; Wouters, Rafael
Publisher:	[S.l.] : SSRN
Subject:	Neoklassische Synthese \| Neoclassical synthesis \| Dynamisches Gleichgewicht \| Dynamic equilibrium \| Risikoprämie \| Risk premium \| Inflation \| Soziale Kosten \| Social costs \| Schätzung \| Estimation \| Theorie \| Theory

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Extent:	1 Online-Ressource (36 p)
Type of publication:	Book / Working Paper
Language:	English
Notes:	Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 24, 2022 erstellt
Other identifiers:	10.2139/ssrn.4199409 [DOI]
Classification:	E31 - Price Level; Inflation; Deflation ; E43 - Determination of Interest Rates; Term Structure Interest Rates ; E44 - Financial Markets and the Macroeconomy ; E52 - Monetary Policy (Targets, Instruments, and Effects) ; G12 - Asset Pricing
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10013492093