02758cam a22003137 4500001000700000003000500007005001700012008004100029100003500070245017700105260006600282490004200348500001600390520111100406530006101517538007201578538003601650690019601686690010101882690011201983690007702095700003202172700002602204700002002230710004202250830007702292856003802369856003702407w14875NBER20160528181520.0160528s2009 mau||||fs|||| 000 0 eng d1 aFernández-Villaverde, Jesús.10aRisk Mattersh[electronic resource]:bThe Real Effects of Volatility Shocks /cJesús Fernández-Villaverde, Pablo A. Guerrón-Quintana, Juan Rubio-Ramírez, Martín Uribe. aCambridge, Mass.bNational Bureau of Economic Researchc2009.1 aNBER working paper seriesvno. w14875 aApril 2009.3 aThis paper shows how changes in the volatility of the real interest rate at which small open emerging economies borrow have a quantitatively important effect on real variables like output, consumption, investment, and hours worked. To motivate our investigation, we document the strong evidence of time-varying volatility in the real interest rates faced by a sample of four emerging small open economies: Argentina, Ecuador, Venezuela, and Brazil. We postulate a stochastic volatility process for real interest rates using T-bill rates and country spreads and estimate it with the help of the Particle filter and Bayesian methods. Then, we feed the estimated stochastic volatility process for real interest rates in an otherwise standard small open economy business cycle model. We calibrate eight versions of our model to match basic aggregate observations, two versions for each of the four countries in our sample. We find that an increase in real interest rate volatility triggers a fall in output, consumption, investment, and hours worked, and a notable change in the current account of the economy. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aC32 - Time-Series Models • Dynamic Quantile Regressions • Dynamic Treatment Effect Models • Diffusion Processes • State Space Models2Journal of Economic Literature class. 7aC63 - Computational Techniques • Simulation Modeling2Journal of Economic Literature class. 7aF32 - Current Account Adjustment • Short-Term Capital Movements2Journal of Economic Literature class. 7aF41 - Open Economy Macroeconomics2Journal of Economic Literature class.1 aGuerrón-Quintana, Pablo A.1 aRubio-Ramírez, Juan.1 aUribe, Martín.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w14875.4 uhttp://www.nber.org/papers/w1487541uhttp://dx.doi.org/10.3386/w14875