NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Marco Lo Duca

European Central Bank
Kaiserstrasse 29 D-60311
Frankfurt am Main, Germany

E-Mail: marco.lo_duca@ecb.int

NBER Working Papers and Publications

September 2010Risk, Uncertainty and Monetary Policy
with Geert Bekaert, Marie Hoerova: w16397
The VIX, the stock market option-based implied volatility, strongly co-moves with measures of the monetary policy stance. When decomposing the VIX into two components, a proxy for risk aversion and expected stock market volatility ("uncertainty"), we find that a lax monetary policy decreases both risk aversion and uncertainty, with the former effect being stronger. The result holds in a structural vector autoregressive framework, controlling for business cycle movements and using a variety of identification schemes for the vector autoregression in general and monetary policy shocks in particular.

Published: Bekaert, Geert & Hoerova, Marie & Lo Duca, Marco, 2013. "Risk, uncertainty and monetary policy," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 771-788. citation courtesy of

 
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