We theoretically investigate the interaction of endogenous risk intolerance and monetary policy following a large recessionary shock. As asset prices dip, risk-tolerant agents’ wealth share declines. This decline reduces the market’s risk tolerance and triggers a downward loop in asset prices and aggregate demand when the interest rate policy is constrained. In this context, large-scale asset purchases are effective because they transfer unwanted risk to the government’s balance sheet. These effects are sizable when the model is calibrated to match the estimates of aggregate asset demand inelasticity. The COVID-19 shock illustrates the environment we seek to capture.

中文翻译：

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内生风险不容忍和 LSAP 模型：“COVID-19”冲击中的资产价格和总需求

我们从理论上研究了大衰退冲击后内生风险不容忍与货币政策的相互作用。随着资产价格下跌，风险承受能力强的代理人的财富份额下降。这种下降会降低市场的风险承受能力，并在利率政策受到约束时引发资产价格和总需求的下行循环。在这种情况下，大规模资产购买是有效的，因为它们将不必要的风险转移到政府的资产负债表上。当模型被校准以匹配总资产需求无弹性的估计时，这些影响是相当大的。COVID-19 冲击说明了我们寻求捕捉的环境。