NBER Working Paper No. 18682
We augment a standard monetary DSGE model to include a Bernanke-Gertler-Gilchrist financial accelerator mechanism. We fit the model to US data, allowing the volatility of cross-sectional idiosyncratic uncertainty to fluctuate over time. We refer to this measure of volatility as 'risk'. We find that fluctuations in risk are the most important shock driving the business cycle.
Supplementary materials for this paper:
Document Object Identifier (DOI): 10.3386/w18682
Published: Christiano, Lawrence J., Roberto Motto, and Massimo Rostagno. 2014. "Risk Shocks." American Economic Review, 104(1): 27-65.
Users who downloaded this paper also downloaded these: