Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200589
Authors: 
Farhi, Emmanuel
Gourio, François
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 2018-19
Abstract: 
Real risk-free interest rates have trended down over the past 30 years. Puzzlingly in light of this decline, (1) the return on private capital has remained stable or even increased, creating an increasing wedge with safe interest rates; (2) stock market valuation ratios have increased only moderately; (3) investment has been lackluster. We use a simple extension of the neoclassical growth model to diagnose the nexus of forces that jointly accounts for these developments. We .nd that rising market power, rising unmeasured intangibles, and rising risk premia, play a crucial role, over and above the traditional culprits of increasing savings supply and technological growth slowdown.
Subjects: 
equity premium
risk-free rate
investment
profitability
valuation ratios
labor share
competition
markups
safe assets
JEL: 
E34
G12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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