Cyclical risk aversion, precautionary saving and monetary policy

This paper analyses the conduct of monetary policy in an environment in which cyclical swings in risk appetite affect households’ propensity to save. It uses a New Keynesian model featuring external habit formation to show that taking note of precautionary saving motives justifies an accommodative policy bias in the face of persistent, adverse disturbances. Equally, policy should be more restrictive following positive shocks.

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Year of publication:	2011-04-12
Authors:	De Paoli, Bianca ; Zabczyk, Pawel
Institutions:	Bank of England
Subject:	Precautionary saving \| monetary policy \| cyclical risk aversion \| macro-finance \| DSGE models

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Extent:	application/pdf
Series:	Bank of England working papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series Bank of England working papers Number 418 32 pages
Classification:	E32 - Business Fluctuations; Cycles ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010704391