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Risk and the Economy: A Finance Perspective

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Financial Risk: Theory, Evidence and Implications

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Abstract

In their introduction to a recent conference volume, Brunner and Meltzer identify “the integration of risk and uncertainty, a standard feature of research in finance, into the type of general equilibrium models used by macroeconomists” as one of the “major areas of interest to macroeconomists in the years ahead.”1 Macroeconomists are concerned with the economy as a whole and changes in risk and uncertainty affect the economy as a whole. While macroeconomists were always aware of this simple truth, they are now more likely to act on it and to take it into account explicitly in their models. The Lucas critique has convinced many of them of the necessity of building their models on the actions of optimizing households. Unless households are risk-neutral, changes in risk affect their consumption and investment plans, and hence have macroeconomic implications.

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Authors
  1. K. C. Chan
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  2. Rene M. Stulz
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Editor information

Editors and Affiliations

  1. The Federal Reserve Bank of St. Louis, USA

    Courtenay C. Stone

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© 1989 Kluwer Academic Publishers

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Chan, K.C., Stulz, R.M. (1989). Risk and the Economy: A Finance Perspective. In: Stone, C.C. (eds) Financial Risk: Theory, Evidence and Implications. Springer, Dordrecht. https://doi.org/10.1007/978-94-009-2665-3_5

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  • DOI: https://doi.org/10.1007/978-94-009-2665-3_5

  • Publisher Name: Springer, Dordrecht

  • Print ISBN: 978-94-010-7701-9

  • Online ISBN: 978-94-009-2665-3

  • eBook Packages: Springer Book Archive

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