investigate whether employing the narrative monetary shock account as a proxy variable in a VAR model aligns both shock series. We …

investigate whether employing the narrative monetary shocks as a proxy variable in a VAR model aligns both shock series. We find …

the period January 1999 to August 2007, our results show that a shock in the risk aversion indicator affects negatively … future real activity in the eurozone in a similar way to an exchange rate shock. The ECB reacts significantly to a risk … aversion shock by reducing the interest rate in order to provide liquidity. Moreover, assuming rational expectations and using …