Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129440
Authors: 
Curatola, Giuliano
Donadelli, Michael
Grüning, Patrick
Meinerding, Christoph
Year of Publication: 
2016
Series/Report no.: 
SAFE Working Paper Series 129
Abstract: 
We introduce long-run investment productivity risk in a two-sector production economy to explain the joint behavior of macroeconomic quantities and asset prices. Long-run productivity risk in both sectors, for which we provide economic and empirical justification, acts as a substitute for shocks to the marginal efficiency of investments in explaining the equity premium and the stock return volatility differential between the consumption and the investment sector. Moreover, adding moderate wage rigidities allows the model to reproduce the empirically observed positive co-movement between consumption and investment growth.
Subjects: 
general equilibrium asset pricing
production economy
long-run risk
investment-specific shocks
nominal rigidities
JEL: 
E32
G12
Document Type: 
Working Paper

Files in This Item:
File
Size
874.93 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.