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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
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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.

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