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Risk aversion in the Eurozone

Listed author(s):
  • Benchimol, Jonathan

We propose a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model where a risk aversion shock enters a separable utility function. We analyze five periods from 1971 through 2011, each lasting for 20years, to follow over time the dynamics of several parameters such as the risk aversion parameter; the Taylor rule coefficients; and the role of the risk aversion shock in output, inflation, interest rate, and real money balances in the Eurozone. Our analysis suggests that risk aversion was a more important component of output and real money balance dynamics between 2006 and 2011 than it was between 1971 and 2006, at least in the short run.

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File URL: http://www.sciencedirect.com/science/article/pii/S1090944313000707
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Article provided by Elsevier in its journal Research in Economics.

Volume (Year): 68 (2014)
Issue (Month): 1 ()
Pages: 39-56

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Handle: RePEc:eee:reecon:v:68:y:2014:i:1:p:39-56
DOI: 10.1016/j.rie.2013.11.005
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622941

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  1. Benchimol, Jonathan & Fourçans, André, 2012. "Money and risk in a DSGE framework: A Bayesian application to the Eurozone," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 95-111.
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