Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153597 
Authors: 
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper No. 1163
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This article studies the asset pricing and the business cycle implications of habit formation in a production economy with capital adjustment costs and endogenous labor supply. A specification of internal habit in the mix of consumption and leisure which minimizes the wealth effect on labor supply is introduced into an otherwise standard real business cycle model. This mechanism enhances the model’s ability to explain asset pricing puzzles.
Subjects: 
adjustment costs
equity premium puzzle
Labor supply
JEL: 
G12
E32
J22
Document Type: 
Working Paper

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