Interpreting volatility shocks as preference shocks

This paper examines the relationship between volatility shocks and preference shocks in an analytically tractable endogenous growth model with recursive preferences and stochastic volatility. I show that there exists an explicit mapping between volatility shocks and preference shocks, and a rise in volatility generates the same impulse responses of macroeconomic aggregates as a negative preference shock.

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Year of publication:	2016
Authors:	Xu, Shaofeng
Publisher:	Ottawa : Bank of Canada
Subject:	Business fluctuations and cycles \| Economic models

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Series:	Bank of Canada Staff Working Paper ; 2016-45
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	10.34989/swp-2016-45 [DOI] 869498959 [GVK] hdl:10419/148152 [Handle] RePEc:bca:bocawp:16-45 [RePEc]
Classification:	E2 - Consumption, Saving, Production, Employment, and Investment ; E3 - Prices, Business Fluctuations, and Cycles
Source:	EconStor

Persistent link: https://www.econbiz.de/10011564725