Risk Shocks
Top Cited Papers
- 1 January 2014
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 104 (1) , 27-65
- https://doi.org/10.1257/aer.104.1.27
Abstract
We augment a standard monetary dynamic general equilibrium 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. (JEL D81, D82, E32, E44, L26)Keywords
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