| 来源类型 | Working Paper |
| 规范类型 | 报告 |
| DOI | 10.3386/w27044 |
| 来源ID | Working Paper 27044 |
| A Model of Endogenous Risk Intolerance and LSAPs: Asset Prices and Aggregate Demand in a \u201cCovid-19\u201d Shock | |
| Ricardo J. Caballero; Alp Simsek | |
| 发表日期 | 2020-04-27 |
| 出版年 | 2020 |
| 语种 | 英语 |
| 摘要 | In this paper we: (i) provide a model of the endogenous risk intolerance and severe asset price and aggregate demand contractions following an adverse real (non-financial) shock; and (ii) demonstrate the effectiveness of Large Scale Asset Purchases (LSAPs) in addressing these contractions. The key mechanism stems from heterogeneous risk tolerance: as a recessionary shock hits the economy and brings down asset prices, risk-tolerant agents’ wealth share declines and their leverage rises endogenously. This reduces the market’s risk tolerance and generates downward pressure on asset prices and aggregate demand. When monetary policy is unconstrained, it can offset the decline in risk tolerance with an interest rate cut that boosts the market’s Sharpe ratio. However, if the interest rate policy is constrained, new contractionary feedbacks arise: recessionary shocks lead to further asset price and output drops, which feed the risk-o¤ episode and trigger a downward loop. In this context, LSAPs improve asset prices and aggregate demand by transferring risk to the government’s balance sheet, which reduces the market’s required Sharpe ratio and reverses the contractionary feedbacks. Quantitatively, we show that aggregate shocks and LSAPs have large impacts on asset prices when the model is calibrated to fit the inelastic demand for aggregate assets uncovered in recent literature. We also show that heterogeneity in risk tolerance explains part of the demand inelasticity in normal times, and further reduces the elasticity after a recessionary shock. The Covid-19 shock and the large response by all major central banks provide a vivid illustration of the environment we seek to capture. |
| 主题 | Macroeconomics ; Macroeconomic Models ; Consumption and Investment ; Business Cycles ; Money and Interest Rates ; Financial Economics ; Portfolio Selection and Asset Pricing ; COVID-19 |
| URL | https://www.nber.org/papers/w27044 |
| 来源智库 | National Bureau of Economic Research (United States) |
| 引用统计 | |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/584716 |
| 推荐引用方式 GB/T 7714 | Ricardo J. Caballero,Alp Simsek. A Model of Endogenous Risk Intolerance and LSAPs: Asset Prices and Aggregate Demand in a \u201cCovid-19\u201d Shock. 2020. |
| 条目包含的文件 | ||||||
| 文件名称/大小 | 资源类型 | 版本类型 | 开放类型 | 使用许可 | ||
| w27044.pdf（876KB） | 智库出版物 | 限制开放 | CC BY-NC-SA | 浏览 | ||
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