Risk, Uncertainty and Monetary Policy

Geert Bekaert, Marie Hoerova and Marco Lo Duca

No 16397, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility ("uncertainty"), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being stronger. The result holds in a structural vector autoregressive framework, controlling for business cycle movements and using a variety of identification schemes for the vector autoregression in general and monetary policy shocks in particular.

JEL-codes: E32 E44 E52 G12 (search for similar items in EconPapers)
Date: 2010-09
Note: AP ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85)

Published as Bekaert, Geert & Hoerova, Marie & Lo Duca, Marco, 2013. "Risk, uncertainty and monetary policy," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 771-788.
Published as Geert Bekaert & Marie Hoerova, 2010. "Risk, uncertainty and monetary policy," Research Bulletin, European Central Bank, vol. 10, pages 11-13.

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Related works:
Journal Article: Risk, uncertainty and monetary policy (2013)
Working Paper: Risk, uncertainty and monetary policy (2013)
Working Paper: Risk, uncertainty and monetary policy (2012)
Journal Article: Risk, uncertainty and monetary policy (2010)
Working Paper: Risk, Uncertainty and Monetary Policy (2010)
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