American Economic Review Vol. 104 No. 12 2014

Risk Matters: The Real Effects of Volatility Shocks: Comment

Benjamin Born¹; Johannes Pfeifer²

¹ University of Mannheim, L7, 3-5, 68131 Mannheim, Germany, and CESifo (e-mail: ) · ² University of Mannheim, L7, 3-5, 68131 Mannheim, Germany (e-mail: ).

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.

DOI

10.1257/aer.104.12.4231

Volume

104

Issue

12

Pages

4231-4239

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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