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Risk, Uncertainty and Monetary Policy
Bekaert, Geert - 2010
stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility … ("uncertainty"), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being …
Persistent link: https://www.econbiz.de/10013137030
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Risk, Monetary Policy and the Exchange Rate
Benigno, Gianluca - 2011
volatility shocks is consistent with the empirical evidence. Furthermore we show that risk factors and interest-rate smoothing …
Persistent link: https://www.econbiz.de/10013123697
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Asset Prices and Aggregate Demand in a "Covid-19" Shock : A Model of Endogenous Risk Intolerance and Lsaps
Caballero, Ricardo J. - 2020
In this paper we: (i) provide a model of the endogenous risk intolerance and severe aggregate demand contractions … addressing these contractions. The key mechanism stems from heterogeneous risk tolerance: as a recessionary shock hits the … economy and brings down asset prices, risk-tolerant agents' wealth share declines and their leverage rises endogenously. This …
Persistent link: https://www.econbiz.de/10012835752
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Optimal Monetary Policy Under Uncertainty in DSGE Models : A Markov Jump-Linear-Quadratic Approach
Svensson, Lars E. O. - 2010
We study the design of optimal monetary policy under uncertainty in a dynamic stochastic general equilibrium models. We use a Markov jump-linear-quadratic (MJLQ) approach to study policy design, approximating the uncertainty by different discrete modes in a Markov chain, and by taking...
Persistent link: https://www.econbiz.de/10012759442
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Learning from Prices : Public Communication and Welfare
Amador, Manuel - 2008
We study the effect of releasing public information about productivity or monetary shocks when agents learn from nominal prices. While public releases have the benefit of providing new information, they can have the cost of reducing the informational efficiency of the price system. We show that,...
Persistent link: https://www.econbiz.de/10012770589
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Endogenous Volatility at the Zero Lower Bound : Implications for Stabilization Policy
Basu, Susanto - 2016
At the zero lower bound, the central bank's inability to offset shocks endogenously generates volatility. In this setting, an increase in uncertainty about future shocks causes significant contractions in the economy and may lead to non-existence of an equilibrium. The form of the monetary...
Persistent link: https://www.econbiz.de/10013002240
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Monetary Policy Uncertainty and Economic Fluctuations
Creal, Drew - 2014
We investigate the relationship between uncertainty about monetary policy and its transmission mechanism, and economic fluctuations. We propose a new term structure model where the second moments of macroeconomic variables and yields can have a first-order effect on their dynamics. The data...
Persistent link: https://www.econbiz.de/10013045286
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Monetary Policy with Model Uncertainty : Distribution Forecast Targeting
Svensson, Lars E. O.; Williams, Noah - 2021
We examine optimal and other monetary policies in a linear-quadratic setup with a relatively general form of model uncertainty, so-called Markov jump-linear-quadratic systems extended to include forward-looking variables. The form of model uncertainty our framework encompasses includes: simple...
Persistent link: https://www.econbiz.de/10013218440
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Robustness of Simple Monetary Policy Rules Under Model Uncertainty
Levin, Andrew T.; Wieland, Volker; Williams, John C. - 2021
In this paper, we investigate the properties of alternative monetary policy rules using four structural macroeconometric models: the Fuhrer-Moore model, Taylor's Multi-Country Model, the MSR model of Orphanides and Wieland, and the FRB staff model. All four models incorporate the assumptions of...
Persistent link: https://www.econbiz.de/10013223571
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Rethinking the Role of NAIRU in Monetary Policy : Implications of Model Formulation and Uncertainty
Estrella, Arturo; Mishkin, Frederic S. - 2021
In this paper we rethink the NAIRU concept and examine whether it might have a useful role in monetary policy. We argue that it can, but success depends critically on defining NAIRU as a short-run concept and distinguishing it from a long-run concept like the natural rate of unemployment. We...
Persistent link: https://www.econbiz.de/10013231562