Abstract
This paper integrates a financial accelerator mechanism a la Bernanke et al. (1999) and time-varying uncertainty into a medium-scale Dynamic New Keynesian model. In our model, uncertainty emerges from monetary policy (policy uncertainty) as well as from financial risks (micro uncertainty) and the aggregate state of the economy (macro uncertainty). We describe the time-variant policy, micro and macro uncertainty using a stochastic volatility model. We use this framework to identify how uncertainty propagates and its interplay with financial frictions. We also investigate how uncertainty affects the propagation of other shocks (TFP, monetary policy shocks).
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
