Front Matter Page
Monetary and Capital Markets Department
Contents
1. Introduction
2. Related Literature
3. The NKV Model
3.1. A risk-augmented IS curve
3.2. Microfoundations
3.3. Links between financial conditions and the price of risk
4. Model Solution and Estimation
4.1. Solution
4.2. Data
4.3. Parameter Estimation
4.4. The Volatility Paradox
4.5. The Dynamics and Correlates of Financial Vulnerability
4.6. Fan Charts
4.7. Out of Sample Forecast Performance
5. Monetary and Macroprudential Interactions
5.1. The Separation Principle
5.2. Minsky Redux
6. Efficient Monetary Stabilization sans Macroprudential Tools
7. Summary and Conclusions
References
Auxiliary Appendices
Appendix A. The Analytics of the Conditional Mean-Volatility Trade-off
A.1. The linear model
A.2. Second-order approximation
Appendix B. Derivation of the Risk-Augmented IS Curve
Appendix C. Derivation of the Law of Motion for Financial Conditions
C.1. The diagnostic expectations approach
C.2. The classical financial accelerator approach
Appendix D. Analytical Derivations of Correlation Coefficients
Appendix E. Auxiliary Model Validation Exercises
E.1. Simulated Model Paths: Output Gap Growth
E.2. Simulated Model Paths: Inflation
E.3. Term structures of growth-at-risk