02048cas a2200253 a 4500 AALejournalIMF021120 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513550893 1018-5941 BD-DhAAL BD-DhAAL Adrian, Tobias. Managing Macrofinancial Risk / Tobias Adrian, Francis Vitek. Washington, D.C. : International Monetary Fund, 2020. 1 online resource (60 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We augment a linearized dynamic stochastic general equilibrium (DSGE) model with a tractable endogenous risk mechanism, to support the joint analysis of monetary and macroprudential policy. This state dependent conditional heteroskedasticity mechanism specifies the conditional variances of structural shocks as functions of the business or financial cycle. The resultant heteroskedastic linearized DSGE model preserves the satisfactory simulation and forecasting performance of its nested homoskedastic counterpart for the conditional means of endogenous variables, while substantially improving its goodness of fit to their conditional distributions. In particular, the model matches the key stylized facts of growth at risk. Accounting for state dependent conditional heteroskedasticity makes it optimal for monetary policy to respond more aggressively to the business cycle, and for macroprudential policy to manage the resilience of the banking sector more actively over the financial cycle. Mode of access: Internet Vitek, Francis. IMF Working Papers; Working Paper ; No. 2020/151 Full text available on IMF http://elibrary.imf.org/view/journals/001/2020/151/001.2020.issue-151-en.xml IMF e-Library