Risk Shocks

Lawrence Christiano, Roberto Motto and Massimo Rostagno ()

American Economic Review, 2014, vol. 104, issue 1, 27-65

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.

JEL-codes: D81 D82 E32 E44 L26 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.1.27
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Citations: View citations in EconPapers (550)

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Working Paper: Risk Shocks (2013)
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