Risk shocks

Lawrence J. Christiano, Roberto Motto, Massimo Rostagno*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

368 Scopus citations


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 languageEnglish (US)
Pages (from-to)27-65
Number of pages39
JournalAmerican Economic Review
Issue number1
StatePublished - Jan 1 2014

ASJC Scopus subject areas

  • Economics and Econometrics

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