Risk shocks

Lawrence J. Christiano; Roberto Motto; Massimo Rostagno

doi:10.1257/aer.104.1.27

Risk shocks

Lawrence J. Christiano, Roberto Motto, Massimo Rostagno^*

^*Corresponding author for this work

Economics

Research output: Contribution to journal › Article › peer-review

719 Scopus citations

Abstract

We augment a standard monetary dynamic general equilibrium model to include a Bernanke-Gertler-Gilchrist financial accelerator mechanism. We fit the model to US data, allowing the volatility of cross-sectional idiosyncratic uncertainty to fluctuate over time. We refer to this measure of volatility as risk. We find that fluctuations in risk are the most important shock driving the business cycle.

Original language	English (US)
Pages (from-to)	27-65
Number of pages	39
Journal	American Economic Review
Volume	104
Issue number	1
DOIs	https://doi.org/10.1257/aer.104.1.27
State	Published - Jan 2014

ASJC Scopus subject areas

Economics and Econometrics

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10.1257/aer.104.1.27

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abstract = "We augment a standard monetary dynamic general equilibrium model to include a Bernanke-Gertler-Gilchrist financial accelerator mechanism. We fit the model to US data, allowing the volatility of cross-sectional idiosyncratic uncertainty to fluctuate over time. We refer to this measure of volatility as risk. We find that fluctuations in risk are the most important shock driving the business cycle.",

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AB - We augment a standard monetary dynamic general equilibrium model to include a Bernanke-Gertler-Gilchrist financial accelerator mechanism. We fit the model to US data, allowing the volatility of cross-sectional idiosyncratic uncertainty to fluctuate over time. We refer to this measure of volatility as risk. We find that fluctuations in risk are the most important shock driving the business cycle.

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Risk shocks

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Replication data for: Risk Shocks

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Risk shocks

Abstract

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Replication data for: Risk Shocks

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