Monetary Policy Effects on Financial Risk Premia

Paul Söderlind

University of St. Gallen Department of Economics working paper series 2006 from Department of Economics, University of St. Gallen

Abstract: The effect of monetary policy on financial risk premia is analysed in a simple general equilibrium model with sticky wages and an optimising central bank. Analytical results show that equity risk premia and term premia are higher under inflation targeting than under output targeting, and that inflation risk premia are higher for policies that strike a balance between output and inflation stability (and achieve a social optimum) than for policies that target only one of them.

Keywords: Inflation risk premium; equity risk premium; term premium (search for similar items in EconPapers)
JEL-codes: E44 E52 G12 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2006-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: MONETARY POLICY EFFECTS ON FINANCIAL RISK PREMIA* (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2006:2006-26

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