New Shocks and Asset Price Volatility in General Equilibrium /

We study equity price volatility in general equilibrium with news shocks about future productivity and monetary policy. As West (1988) shows, in a partial equilibrium present discounted value model, news about the future cash flow reduces asset price volatility. We show that introducing news shocks...

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Detaylı Bibliyografya
Yazar: Rebucci, Alessandro
Diğer Yazarlar: Cova, Pietro, Matsumoto, Akito, Pisani, Massimiliano
Materyal Türü: Dergi
Dil:English
Baskı/Yayın Bilgisi: Washington, D.C. : International Monetary Fund, 2011.
Seri Bilgileri:IMF Working Papers; Working Paper ; No. 2011/110
Online Erişim:Full text available on IMF
Diğer Bilgiler
Özet:We study equity price volatility in general equilibrium with news shocks about future productivity and monetary policy. As West (1988) shows, in a partial equilibrium present discounted value model, news about the future cash flow reduces asset price volatility. We show that introducing news shocks in a canonical dynamic stochastic general equilibrium model may not reduce asset price volatility under plausible parameter assumptions. This is because, in general equilibrium, the asset cash flow itself may be affected by the introduction of news shocks. In addition, we show that neglecting to account for policy news shocks (e.g., policy announcements) can potentially bias empirical estimates of the impact of monetary policy shocks on asset prices.
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Fiziksel Özellikler:1 online resource (34 pages)
Materyal Türü:Mode of access: Internet
ISSN:1018-5941
Erişim:Electronic access restricted to authorized BRAC University faculty, staff and students