NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Risk Shocks

Lawrence Christiano, Roberto Motto, Massimo Rostagno

NBER Working Paper No. 18682
Issued in January 2013
NBER Program(s):   EFG

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.

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A data appendix is available at http://www.nber.org/data-appendix/w18682

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18682

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