This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Review: Vol. 101 No. 6 (October 2011)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Risk Matters: The Real Effects of Volatility Shocks

Article Citation

Fernández-Villaverde, Jesús, Pablo Guerrón-Quintana, Juan F. Rubio-Ramírez, and Martin Uribe. 2011. "Risk Matters: The Real Effects of Volatility Shocks." American Economic Review, 101(6): 2530-61.

DOI: 10.1257/aer.101.6.2530

Abstract

We show how changes in the volatility of the real interest rate at which small open emerging economies borrow have an important effect on variables like output, consumption, investment, and hours. We start by documenting the strong evidence of time-varying volatility in the real interest rates faced by four emerging economies: Argentina, Brazil, Ecuador, and Venezuela. We estimate a stochastic volatility process for real interest rates. Then, we feed this process in a standard small open economy business cycle model. We find that an increase in real interest rate volatility triggers a fall in output, consumption, investment, hours, and debt. (JEL E13, E20, E32, E43, F32, F43, 011)

Article Full-Text Access

Full-text Article

Additional Materials

Download Data Set (77.40 KB) | Online Appendix (234.50 KB)

Authors

Fernández-Villaverde, Jesús (U PA)
Guerrón-Quintana, Pablo (Federal Reserve Bank of Philadelphia)
Rubio-Ramírez, Juan F. (Duke U and Federal Reserve Bank of Atlanta)
Uribe, Martin (Columbia U)

JEL Classifications

E13: General Aggregative Models: Neoclassical
E20: Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
E32: Business Fluctuations; Cycles
E43: Interest Rates: Determination, Term Structure, and Effects
F32: Current Account Adjustment; Short-term Capital Movements
F43: Economic Growth of Open Economies
O11: Macroeconomic Analyses of Economic Development


American Economic Review


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us