This paper explores the implications of time varying volatility for optimal monetary policy and the measurement of welfare costs. We show how macroeconomic models with linear and quadratic state dependence in their variance structure can be used for the analysis of optimal policy within the...

This paper uses the exponential generalised heteroscedasticity model-in-mean (EGARCH- M) to analyse the relationship between the equity risk premium and macroeconomic volatility. This premium depends upon conditional volatility, which is significantly affected by the long bond yield, acting as a...

This paper explores the implications of time varying volatility for optimal monetary policy and the measurement of welfare costs. We show how macro-economic models with linear and quadratic state dependence in their variance structure can be used for the analysis of optimal policy within the...

This paper explores the implications of time varying volatility for optimal monetary policy and the measurement of welfare costs. We show how macroeconomic models with linear and quadratic state dependence in their variance structure can be used for the analysis of optimal policy within the...

In this paper, we used modified multivariate EGARCH-M models to assess the relation between the equity risk premium, macroeconomic risk, and inflationary expectations. To rationalise this link between equity risk premia and macroeconomic volatilities, we built our empirical study on the...

This paper develops a macro-finance model of the Brazilian economy and its sovereign debt markets that allows for domestic and international macroeconomic influences as well as swings in investor confidence. It finds significant evidence of common trends in the US and Brazilian economies and...