We use a DSGE model that generates endogenous movements in risk premia to examine the positive and normative … implications of alternative monetary policy rules. As emphasized by the micro-finance literature, variation in risk arises because … portfolios infrequently. We show that the model can account for the mean returns on equity and the risk-free rate, and in line …

that monetary policy, relative risk in fixed investment, and the risk-adjusted return gap between financial and fixed … influenced by their ownership characteristics. It is remarkable to note that the relative risk in fixed investment and …. Meanwhile, firms’ financial investment witnesses influence of the rate of the risk-adjusted return gap between financial and …

We develop a DSGE model in which aggregate shocks induce endogenous movements in risk. The key feature of our model is … cash across accounts. We show that the model can account for the mean returns on equity and the risk-free rate, and … on equity prices through changes in risk …

: risk-averse lenders and lack of monetary policy commitment. A government without commitment chooses excessively counter …-cyclical inflation ex post, which leads risk-averse lenders to require a risk premium ex ante. This makes local currency debt too …