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dc.titleNews Shocks and Asset Price Volatility in General Equilibrium
dc.contributor.authorMatsumoto, Akito
dc.contributor.authorCova, Pietro
dc.contributor.authorPisani, Massimiliano
dc.contributor.authorRebucci, Alessandro
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.date.available2011-08-22T00:00:00
dc.date.issue2011-06-01T00:00:00
dc.description.abstractThis paper studies equity price volatility in general equilibrium with news shocks about future productivity and monetary policy. As West (1998) shows, in a partial equilibrium present discounted value model, news about the future cash flow reduces asset price volatility. This paper shows that introducing news shocks in 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 new shocks. In addition, it is shown 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.
dc.format.extent38
dc.identifier.doihttp://dx.doi.org/10.18235/0011210
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/News-Shocks-and-Asset-Price-Volatility-in-General-Equilibrium.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectMonetary Policy
dc.subjectFinancial Crisis and Structural Adjustement
dc.subject.jelcodeE32 - Business Fluctuations • Cycles
dc.subject.jelcodeF30 - International Finance: General
dc.subject.jelcodeF40 - Macroeconomic Aspects of International Trade and Finance: General
dc.subject.jelcodeG11 - Portfolio Choice • Investment Decisions
dc.subject.keywordsIDB-WP-252
dc.typeWorking Papers
idb.identifier.pubnumberWorking Papers
idb.operationRG-K1113
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