Konferenzbeitrag
Decomposing Risk in Dynamic Stochastic General Equilibrium
We analyze the theoretical moments of a nonlinear approximation to real business cycle model with stochastic volatility and recursive preferences. We nd that the conditional heteroskedasticity of stochastic volatility operationalizes a time-varying risk adjustment channel that induces variability in conditional asset pricing measures and assigns a substantial portion of the variance of macroeconomic variables to variations in precautionary behavior, both while leaving its ability to match key macroeconomic and asset pricing facts untouched. We calculate the theoretical moments directly and decomposes these moments into contributions from shifts in the distribution of future shocks (i.e., risk) and from realized shocks and differing orders of approximation, enabling us to identify the common channel through which stochastic volatility in isolation operates and through which conditional asset pricing measures vary over time. Under frictional investment and varying capital utilization, output drops in response to an increase in risk, but the contributions to the variance of macroeconomic variables from risk becomes negligible.
- Language
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Englisch
- Bibliographic citation
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Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Dynamic Macro Models ; No. E10-V2
- Classification
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Wirtschaft
Computational Techniques; Simulation Modeling
Business Fluctuations; Cycles
Asset Pricing; Trading Volume; Bond Interest Rates
- Event
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Geistige Schöpfung
- (who)
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Lan, Hong
Meyer-Gohde, Alexander
- Event
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Veröffentlichung
- (who)
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
- (where)
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Kiel und Hamburg
- (when)
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2014
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Konferenzbeitrag
Associated
- Lan, Hong
- Meyer-Gohde, Alexander
- ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
Time of origin
- 2014
Other Objects (12)
Decomposing Risk in Dynamic Stochastic General Equilibrium
Decomposing risk in dynamic stochastic general equilibrium
Post-Keynesian dynamic stochastic general equilibrium theory
Macroprudential Regulation in Dynamic Stochastic General Equilibrium Models
Transformed Perturbation Solutions for Dynamic Stochastic General Equilibrium Models
Solution Strategies of Dynamic Stochastic General Equilibrium (DSGE) models
Evaluating dynamic stochastic general equilibrium models using likelihood methods
Decomposing Excess Returns in Stochastic Linear Models
Decomposing excess returns in stochastic linear models
Efficient evaluation and estimation of dynamic stochastic general equilibrium models
Perturbation methods for Markov-switching dynamic stochastic general equilibrium models
Frequentist inference in weakly identified dynamic stochastic general equilibrium models
Decomposing Risk in Dynamic Stochastic General Equilibrium
Decomposing risk in dynamic stochastic general equilibrium
Post-Keynesian dynamic stochastic general equilibrium theory
Macroprudential Regulation in Dynamic Stochastic General Equilibrium Models
Transformed Perturbation Solutions for Dynamic Stochastic General Equilibrium Models
Solution Strategies of Dynamic Stochastic General Equilibrium (DSGE) models
Evaluating dynamic stochastic general equilibrium models using likelihood methods
Decomposing Excess Returns in Stochastic Linear Models
Decomposing excess returns in stochastic linear models
Efficient evaluation and estimation of dynamic stochastic general equilibrium models
Perturbation methods for Markov-switching dynamic stochastic general equilibrium models
Frequentist inference in weakly identified dynamic stochastic general equilibrium models
Decomposing Risk in Dynamic Stochastic General Equilibrium
Decomposing risk in dynamic stochastic general equilibrium
Post-Keynesian dynamic stochastic general equilibrium theory
Macroprudential Regulation in Dynamic Stochastic General Equilibrium Models
Transformed Perturbation Solutions for Dynamic Stochastic General Equilibrium Models
Solution Strategies of Dynamic Stochastic General Equilibrium (DSGE) models
Evaluating dynamic stochastic general equilibrium models using likelihood methods
Decomposing Excess Returns in Stochastic Linear Models
Decomposing excess returns in stochastic linear models
Efficient evaluation and estimation of dynamic stochastic general equilibrium models
Perturbation methods for Markov-switching dynamic stochastic general equilibrium models