Please use this identifier to cite or link to this item:
|Title:||Relative risk aversion and the transmission of financial crises|
International asset pricing
Relative risk aversion
|Citation:||Boschi, M., Goenka, A. (2012-01). Relative risk aversion and the transmission of financial crises. Journal of Economic Dynamics and Control 36 (1) : 85-99. ScholarBank@NUS Repository. https://doi.org/10.1016/j.jedc.2011.07.005|
|Abstract:||We study how investor behavior affects the transmission of financial crises. If investors exhibit decreasing relative risk aversion, then negative wealth shocks increase the risk premium required to hold risky assets. We integrate this into a second generation model of currency crises which allows for contagion through changes in fundamentals. Investor behavior can be a transmission channel of financial crises, as changes in risk premia increase the coverage ratio and makes the defense of a peg less attractive for the policy maker. The feedback effect of the risk premia on the probability of devaluation also makes multiple equilibria more likely. The possible stabilization effects of capital controls and a Tobin tax on the international transmission of financial crises are also studied. © 2011 Elsevier B.V.|
|Source Title:||Journal of Economic Dynamics and Control|
|Appears in Collections:||Staff Publications|
Show full item record
Files in This Item:
There are no files associated with this item.
checked on Jun 22, 2018
WEB OF SCIENCETM
checked on May 22, 2018
checked on Jun 1, 2018
Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.