Cyclical risk aversion, precautionary saving and monetary policy

Bianca De Paoli () and Pawel Zabczyk

No 418, Bank of England working papers from Bank of England

Abstract: This paper analyses the conduct of monetary policy in an environment in which cyclical swings in risk appetite affect households’ propensity to save. It uses a New Keynesian model featuring external habit formation to show that taking note of precautionary saving motives justifies an accommodative policy bias in the face of persistent, adverse disturbances. Equally, policy should be more restrictive following positive shocks.

Keywords: Precautionary saving; monetary policy; cyclical risk aversion; macro-finance; DSGE models. (search for similar items in EconPapers)
JEL-codes: E32 G12 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2011-04-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Cyclical Risk Aversion, Precautionary Saving, and Monetary Policy (2013)
Journal Article: Cyclical Risk Aversion, Precautionary Saving, and Monetary Policy (2013)
Working Paper: Cyclical Risk Aversion, Precautionary Saving and Monetary Policy (2012)
Working Paper: Cyclical risk aversion, precautionary saving and Monetary Policy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0418

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