کد مقاله | کد نشریه | سال انتشار | مقاله انگلیسی | نسخه تمام متن |
---|---|---|---|---|
986953 | 1480819 | 2012 | 22 صفحه PDF | دانلود رایگان |
This paper studies how rare disasters and uncertainty shocks affect risk premia in DSGE models approximated to second and third order. Based on an extension of the results in Schmitt-Grohé and Uribe (2004) to third order, we derive propositions for how rare disasters, stochastic volatility, and GARCH affect any type of risk premia in a wide class of DSGE models. To quantify the effects, we set up a standard New Keynesian DSGE model where total factor productivity includes rare disasters, stochastic volatility, and GARCH. We find that rare disasters increase the level of the 10-year nominal term premium, whereas a key effect of uncertainty shocks, i.e. stochastic volatility and GARCH, is an increase in the variability of this premium.
► Non-normal shocks affect all premia in DSGE models at second and third order.
► Rare disasters influence the level of risk premia at third order.
► Stochastic volatility and GARCH affect the level and variance at third order.
► These effects for the 10-year term premium are shown in a New Keynesian model.
Journal: Review of Economic Dynamics - Volume 15, Issue 3, July 2012, Pages 295–316