Risk Matters: The Real Effects of Volatility Shocks: Comment
- (pp. 4231-39)
Abstract
We show that the risk-shock business cycle model of Fernández-Villaverde et al. (2011) must be recalibrated because it underpredicts the targeted business cycle moments by a factor of three once a time aggregation error is corrected. Recalibrating the corrected model for the benchmark case of Argentina, the peak response and the contribution of interest rate risk shocks to business cycle volatility increase. However, the recalibrated model does worse in capturing the business cycle properties of net exports once an additional error in the computation of net exports is corrected.Citation
Born, Benjamin, and Johannes Pfeifer. 2014. "Risk Matters: The Real Effects of Volatility Shocks: Comment." American Economic Review, 104 (12): 4231-39. DOI: 10.1257/aer.104.12.4231Additional Materials
JEL Classification
- E13 General Aggregative Models: Neoclassical
- E20 Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: 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