Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296138 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11049
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We study the role of asset revaluation in the monetary transmission mechanism. We build an analytical heterogeneous-agents model with two main ingredients: i) rare disasters; ii) heterogeneous beliefs. The model captures time-varying risk premia and precautionary savings in a setting that nests the textbook New Keynesian model. The model generates large movements in asset prices after a monetary shock but these movements can be neutral on real variables. Real effects depend on the redistribution among agents with heterogeneous precautionary motives. In a calibrated exercise, we find that this channel accounts for the majority of the transmission to output.
Subjects: 
monetary policy
wealth effects
asset prices
aggregate risk
heterogeneity beliefs
JEL: 
E21
E44
E52
G12
Document Type: 
Working Paper
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