Macroeconomic Asset Price Risks in the Presence of the Zero Lower Bound

Project Start:02/2016
Researchers:Nicole Branger, Jun E. Li, Loriana Pelizzon, Christian Schlag, Ivan Shaliastovich, Dongho Song
Category: Financial Markets, Macro Finance
Funded by:Volkswagen Stiftung

This project deals with a model featuring long-run risks in consumption growth and inflation. Augmented by the zero lower bound, the model is used to price treasury bonds in equilibrium and to compute their risk premia. Furthermore, latent states are implied from equilibrium prices, and their dynamics are estimated. The objective of this project is to improve our understanding of the mechanisms by which the presence of the zero lower bound is transmitted to asset prices and risk premia.