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Risk Aversion in the Euro area

  • Jonathan Benchimol


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, Economics Department - Essec Business School)

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, each one lasting twenty years, to follow over time the dynamics of several parameters (such as the risk aversion parameter), the Taylor rule coefficients and the role of this risk aversion shock on output 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 had been between 1971 and 2006, at least in the short run.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00713669.

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Date of creation: 28 Jun 2012
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Publication status: Published in 29th GdRE Annual International Symposium on Money, Banking and Finance, Jun 2012, Nantes, France
Handle: RePEc:hal:cesptp:hal-00713669
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