Andreasen, Martin - In: Review of Economic Dynamics 15 (2012) 3, pp. 295-316
This paper studies how rare disasters and uncertainty shocks affect risk premia in DSGE models approximated to second and third order. Based on an extension of the results in Schmitt-Grohé & Uribe (2004) to third order, we derive propositions for how rare disasters, stochastic volatility, and...