Time-Varying Risk Shocks and the Zero Lower Bound

Konferenzbeitrag

This paper shows that increased volatility of Örm-level productivity can push the nominal interest rate to its lower bound with large amplification effects on macroeconomic aggregates. The framework combines a simple canonical Önancial accelerator model, time varying risk shocks, and a zero lower bound on the nominal interest rate. The amplification mechanism results from a portfolio re-balancing from households, who reduce capital investment in favor of risk-free bonds. Consequently, the capital loan volume decreases which then leads to a large decline in economic activity. We show that a substantial drop in output is accompanied by small changes in ináation. We, thus, also address the "Missing Deáation Puzzle" in the Phillips Curve literature.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2019: 30 Jahre Mauerfall - Demokratie und Marktwirtschaft - Session: Monetary Policy IV ; No. C10-V2

Classification and Topics

• Classification: Wirtschaft
• Subject: zero lower bound ; credit channel ; time-varying risk shocks ; missing deáation puzzle ; monetary policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Strobel, Johannes ; Lee, Gabriel ; Dorofeenko, Victor ; Salyer, Kevin
• Event: Veröffentlichung
• (who): ZBW - Leibniz-Informationszentrum Wirtschaft
• (where): Kiel, Hamburg
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/203491
• Last update: 10.03.2025, 11:42 AM CET