Volatility Risk Pass-Through

Yang Liu (), Mariano Croce, Ivan Shaliastovich and Ric Colacito
Additional contact information
Mariano Croce: University of North Carolina at Chapel H
Ivan Shaliastovich: University of Pennsylvania
Ric Colacito: University of North Carolina, Chapel Hil

No 135, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: We produce novel empirical evidence on the relevance of output volatility (vol) shocks for both currency and international quantity dynamics. Focusing on G-17 countries, we document that: (1) consumption and output vols are imperfectly correlated within countries; (2) across countries, consumption vol is more correlated than output vol; (3) the pass-through of relative output vol shocks onto relative consumption vol is significant, especially for small countries; and (4) consumption differentials vol and exchange rate vol are disconnected. We rationalize these findings in a frictionless model with multiple goods and recursive preferences featuring a novel and rich risk-sharing of vol shocks.

Date: 2016
New Economics Papers: this item is included in nep-dge and nep-opm
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Related works:
Working Paper: Volatility Risk Pass-Through (2018)
Working Paper: Volatility Risk Pass-through (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed016:135

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