New shocks and asset price volatility in general equilibrium /

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Bibliographic Details
Imprint:	[Washington, D.C.] : International Monetary Fund, ©2011.
Description:	1 online resource (35 pages)
Language:	English
Series:	IMF working paper ; WP/11/110 IMF working paper ; WP/11/110.
Subject:	Assets (Accounting) -- Prices -- Econometric models. Business cycles -- Econometric models. Monetary policy -- Econometric models. Assets (Accounting) -- Prices -- Econometric models. Business cycles -- Econometric models. Monetary policy -- Econometric models.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12499332

Hidden Bibliographic Details
Other authors / contributors:	Matsumoto, Akito, author. International Monetary Fund. European Department, issuing body.
ISBN:	9781462342518 1462342515 1283563347 9781283563345
Notes:	Includes bibliographical references.
Summary:	We study equity price volatility in general equilibrium with news shocks about future productivity and monetary policy. As West (1988) shows, in a partial equilibrium present discounted value model, news about the future cash flow reduces asset price volatility. We show that introducing news shocks in a canonical dynamic stochastic general equilibrium model may not reduce asset price volatility under plausible parameter assumptions. This is because, in general equilibrium, the asset cash flow itself may be affected by the introduction of news shocks. In addition, we show that neglecting to account for policy news shocks (e.g., policy announcements) can potentially bias empirical estimates of the impact of monetary policy shocks on asset prices.

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