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On the Structural Interpretation of the Smets–Wouters “Risk Premium” Shock
Author(s) -
FISHER JONAS D.M.
Publication year - 2015
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12184
Subject(s) - treasury , shock (circulatory) , interpretation (philosophy) , risk premium , economics , actuarial science , econometrics , computer science , medicine , political science , law , programming language
This article shows that the “risk premium” shock in Smets and Wouters (2007) can be interpreted as a structural shock to the demand for safe and liquid assets such as short‐term U.S. Treasury securities. Several implications of this interpretation are discussed.