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Asset Prices And Business Cycles Under Market Incompleteness
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Book Synopsis Asset Prices and Business Cycles Under Market Incompleteness by : Eva Carceles-Poveda
Download or read book Asset Prices and Business Cycles Under Market Incompleteness written by Eva Carceles-Poveda and published by . This book was released on 2007 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the quantitative implications of a real business cycle model where the firm is the capital owner, households are heterogeneous, and markets are incomplete due to restricted asset trade. Since the usual firm objective is no longer well defined under these assumptions, several non standard objectives are incorporated into the model. These include variants of market value maximization and a utility function for the firm. We find that the presence of market incompleteness hardly alters the behavior of asset returns. On the other hand, the behavior of the macroeconomic aggregates is sensitive to the firm objective, which affects the capital accumulation path. In contrast to conventional findings, capital is not necessarily higher when markets are incomplete. In addition, the different capital accumulation effects imply that shareholders with different asset wealth might prefer different firm objectives.
Book Synopsis Reconsidering the Costs of Business Cycles with Incomplete Markets by : Andrew Atkeson
Download or read book Reconsidering the Costs of Business Cycles with Incomplete Markets written by Andrew Atkeson and published by . This book was released on 1994 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: In this paper, we measure the potential welfare gains from counter-cyclical policy in an economy with incomplete markets. In the course of conducting this measurement, we focus on two questions as central to the determination of those potential gains: (1) what is the likely effect of counter-cyclical policy on the nature of the income risk faced by individuals in the economy, and (2) what are the likely general equilibrium effects brought about as asset prices change due to the implementation of counter-cyclical policies? In taking up the first question, we see it as critical to distinguish whether the main effect of counter-cyclical policy is to directly reduce the income risk faced by each individual or is simply to reduce the correlation across individuals in the income risk that they face. We present a model of the wage and employment risk faced by individuals over the cycle in which the levels of those risks are chosen endogenously. On the basis of that model, we argue that the main effect of counter- cyclical policy aimed at reducing aggregate fluctuations may be simply to remove the correlation across individuals in the unemployment risk that they face. We then use asset price data to argue that in an incomplete markets framework, the potential welfare gains from counter-cyclical policy are close to zero.
Book Synopsis Asset Prices in Affine Real Business Cycle Models by : Maral Shamloo
Download or read book Asset Prices in Affine Real Business Cycle Models written by Maral Shamloo and published by International Monetary Fund. This book was released on 2010-11-01 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a tractable way to solve for equilibrium quantities and asset prices in a class of real business cycle models featuring Epstein-Zin preferences and affine dynamics for productivity growth and volatility. The method relies on log-linearization and exploits the log-normality of all the quantities. It is an easy substitute for more involved numerical techniques, such as higher order perturbation methods, and allows for easy implementation and analytical results. We show explicitly the link with perturbation techniques and find that the quantitative difference between the two is insignificant for several models of interest.
Book Synopsis Asset Prices, Consumption, and the Business Cycle by : John Y. Campbell
Download or read book Asset Prices, Consumption, and the Business Cycle written by John Y. Campbell and published by . This book was released on 1998 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the behavior of financial asset prices in relation to consumption. The paper lists some important stylized facts that characterize US data, and relates them to recent developments in equilibrium asset pricing theory. Data from other countries are examined to see which features of the US experience apply more generally. The paper argues that to make sense of asset market behavior one needs a model in which the market price of risk is high, time-varying, and correlated with the state of the economy. Models that have this feature, including models with habit-formation in utility, heterogeneous investors, and irrational expectations, are discussed. The main focus is on stock returns and short-term real interest rates, but bond returns are also considered.
Book Synopsis Preventing Currency Crises in Emerging Markets by : Sebastian Edwards
Download or read book Preventing Currency Crises in Emerging Markets written by Sebastian Edwards and published by University of Chicago Press. This book was released on 2002-11-15 with total page 782 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economists and policymakers are still trying to understand the lessons recent financial crises in Asia and other emerging market countries hold for the future of the global financial system. In this timely and important volume, distinguished academics, officials in multilateral organizations, and public and private sector economists explore the causes of and effective policy responses to international currency crises. Topics covered include exchange rate regimes, contagion (transmission of currency crises across countries), the current account of the balance of payments, the role of private sector investors and of speculators, the reaction of the official sector (including the multilaterals), capital controls, bank supervision and weaknesses, and the roles of cronyism, corruption, and large players (including hedge funds). Ably balancing detailed case studies, cross-country comparisons, and theoretical concerns, this book will make a major contribution to ongoing efforts to understand and prevent international currency crises.
Book Synopsis Asset Pricing Lessons for Modeling Business Cycles by : Michele Boldrin
Download or read book Asset Pricing Lessons for Modeling Business Cycles written by Michele Boldrin and published by . This book was released on 1996 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model which accounts for the observed equity premium and average risk free rate, without implying counterfactually high risk aversion. The model also does well in accounting for business cycle phenomena. With respect to the conventional measures of business cycle volatility and comovement with output, the model does roughly as well as the standard business cycle model. On two other dimensions, the model's business cycle implications are actually improved. Its enhanced internal propagation allows it to account for the fact that there is positive persistence in output growth, and the model also provides a resolution to the 'excess sensitivity puzzle' for consumption and income. Key features of the model are habit persistence preferences, and a multisector technology with limited intersectoral mobility of factors of production.
Book Synopsis NBER Macroeconomics Annual 1994 by : Stanley Fischer
Download or read book NBER Macroeconomics Annual 1994 written by Stanley Fischer and published by MIT Press. This book was released on 1994 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the ninth in a series of annuals from the National Bureau of Economic Research that are designed to stimulate research on problems in applied economics, to bring frontier theoretical developments to a wider audience, and to accelerate the interaction between analytical and empirical research in macroeconomics. Contents On the Speed of Transition in Eastern Europe, Philippe Aghion and Olivier Jean Blanchard * The Costs of Business Cycles with Incomplete Markets, Andrew Atkeson and Christopher Phelan * The U.S. Fiscal Problem: Where We Are, How We Got Here and Where We Are Going, Alan Auerbach * The East Asian Miracle Economies, John Page * What Ends Recessions? Christina Romer and David Romer * Toward a Modern Macroeconomic Model Usable for Policy Analysis, Christopher Sims and Eric Leeper
Book Synopsis Financial Markets and the Real Economy by : John H. Cochrane
Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Book Synopsis Modern Business Cycle Theory by : Robert J. Barro
Download or read book Modern Business Cycle Theory written by Robert J. Barro and published by . This book was released on 1989 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: The new classical approach to macroeconomics, which assumes that people gather and use economic information efficiently, has been the most important theoretical advance since the Keynesian revolution of the 1930s. This book surveys the major contributions of the "second generation" of proponents of the new classical approach, emphasizing real business cycle theories and applying them to a variety of phenomena. The chapters include expositions of growth theory, real models of business fluctuations, the informational role of prices, consumption, fiscal policy, rules versus discretion in monetary policy, time consistency and policy, and monetary models. Although the chapters are aimed at advanced undergraduate- and graduate-level students, they will also be of interest to researchers who are looking for a compact and original exposition of the new classical macroeconomics.
Book Synopsis Credit Frictions and 'sudden Stops' in Small Open Economies by : Cristina Arellano
Download or read book Credit Frictions and 'sudden Stops' in Small Open Economies written by Cristina Arellano and published by . This book was released on 2002 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial frictions are a central element of most of the models that the literature on emerging markets crises has proposed for explaining the Sudden Stop' phenomenon. To date, few studies have aimed to examine the quantitative implications of these models and to integrate them with an equilibrium business cycle framework for emerging economies. This paper surveys these studies viewing them as ability-to-pay and willingness-to-pay variations of a framework that adds occasionally binding borrowing constraints to the small open economy real-business-cycle model. A common feature of the different models is that agents factor in the risk of future Sudden Stops in their optimal plans, so that equilibrium allocations and prices are distorted even when credit constraints do not bind. Sudden Stops are a property of the unique, flexible-price competitive equilibrium of these models that occurs in a particular region of the state space in which negative shocks make borrowing constraints bind. The resulting nonlinear effects imply that solving the models requires non-linear numerical methods, which are described in the survey. The results show that the models can yield relatively infrequent Sudden Stops with large current account reversals and deep recessions nested within smoother business cycles. Still, research in this area is at an early stage and this survey aims to stimulate further work.
Book Synopsis Business Cycles by : Victor Zarnowitz
Download or read book Business Cycles written by Victor Zarnowitz and published by University of Chicago Press. This book was released on 2007-11-01 with total page 613 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume presents the most complete collection available of the work of Victor Zarnowitz, a leader in the study of business cycles, growth, inflation, and forecasting.. With characteristic insight, Zarnowitz examines theories of the business cycle, including Keynesian and monetary theories and more recent rational expectation and real business cycle theories. He also measures trends and cycles in economic activity; evaluates the performance of leading indicators and their composite measures; surveys forecasting tools and performance of business and academic economists; discusses historical changes in the nature and sources of business cycles; and analyzes how successfully forecasting firms and economists predict such key economic variables as interest rates and inflation.
Book Synopsis NBER Macroeconomics Annual 1992 by : Olivier Blanchard
Download or read book NBER Macroeconomics Annual 1992 written by Olivier Blanchard and published by MIT Press. This book was released on 1992 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the seventh in a series of annuals from the National Bureau of Economic Research that are designed to stimulate research on problems in applied economics, to bring frontier theoretical developments to a wider audience, and to accelerate the interaction between analytical and empirical research in macroeconomics. Contents What Shall We Do Today? Goals and Signposts in the Operation of Monetary Policy, Ben S. Bernanke and Frederic S. Mishkin - A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore, Alwyn Young - International Trade and the Wage Structure, Steven J. Davis - Imperfect Information and Macroeconomic Analysis, Joseph E. Stiglitz and Bruce Greenwald - Asset Pricing Lessons for Macroeconomics, Lars P. Hansen and John H. Cochrane - Postmortem on the Debt Crisis, Daniel Cohen
Book Synopsis Asset Prices and Monetary Policy by : John Y. Campbell
Download or read book Asset Prices and Monetary Policy written by John Y. Campbell and published by University of Chicago Press. This book was released on 2008-11-15 with total page 444 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic growth, low inflation, and financial stability are among the most important goals of policy makers, and central banks such as the Federal Reserve are key institutions for achieving these goals. In Asset Prices and Monetary Policy, leading scholars and practitioners probe the interaction of central banks, asset markets, and the general economy to forge a new understanding of the challenges facing policy makers as they manage an increasingly complex economic system. The contributors examine how central bankers determine their policy prescriptions with reference to the fluctuating housing market, the balance of debt and credit, changing beliefs of investors, the level of commodity prices, and other factors. At a time when the public has never been more involved in stocks, retirement funds, and real estate investment, this insightful book will be useful to all those concerned with the current state of the economy.
Book Synopsis Business Cycles and Equilibrium by : Fischer Black
Download or read book Business Cycles and Equilibrium written by Fischer Black and published by John Wiley & Sons. This book was released on 2009-11-02 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: An updated look at what Fischer Black's ideas on business cycles and equilibrium mean today Throughout his career, Fischer Black described a view of business fluctuations based on the idea that a well-developed economy will be continually in equilibrium. In the essays that constitute this book, which is one of only two books Black ever wrote, he explores this idea thoroughly and reaches some surprising conclusions. With the newfound popularity of quantitative finance and risk management, the work of Fischer Black has garnered much attention. Business Cycles and Equilibrium-with its theory that economic and financial markets are in a continual equilibrium-is one of his books that still rings true today, given the current economic crisis. This Updated Edition clearly presents Black's classic theory on business cycles and the concept of equilibrium, and contains a new introduction by the person who knows Black best: Perry Mehrling, author of Fischer Black and the Revolutionary Idea of Finance (Wiley). Mehrling goes inside Black's life to uncover what was occurring during the time Black wrote Business Cycles and Equilibrium, while also shedding light on what Black would make of today's financial and economic meltdown and how he would best advise to move forward. The essays within this book reach some interesting conclusions concerning the role of equilibrium in a developed economy Warns about the use and abuse of modeling Explains the risky business of risk in a straightforward and accessible style Contains chapters dedicated to "the effects of uncontrolled banking," "the trouble with econometric models," and "the effects of noise on investing" Includes commentary on Black's life and work at the time Business Cycles and Equilibrium was written as well as insight as to what Black would make of the current financial meltdown Engaging and informative, the Updated Edition of Business Cycles and Equilibrium will give you a better understanding of what is really going on during these uncertain and volatile financial times.
Book Synopsis Models of Business Cycles by : Robert E. Lucas, Jr.
Download or read book Models of Business Cycles written by Robert E. Lucas, Jr. and published by Wiley-Blackwell. This book was released on 1991-01-08 with total page 128 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the past decade macroeconomic theory has undergone a remarkable transformation. At the forefront has been the "rational expectations revolution," and this school's most brilliant exponent is Robert E. Lucas. In this elegant and relatively non-technical survey, Lucas reviews the nature and consequences of recent developments in monetary and business cycle theory. He discusses the usefulness of alternative models in determining the effects of economic policy on consumption streams and individual welfare. Drawing on a specific model of aggregate activity which represents the current frontier in business cycle research, he then examines the contemporary theory of unemployment. Finally and most controversially, he explores the role of monetary disturbances.
Book Synopsis Frontiers of Business Cycle Research by : Thomas F. Cooley
Download or read book Frontiers of Business Cycle Research written by Thomas F. Cooley and published by Princeton University Press. This book was released on 1995-02-26 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: This introduction to modern business cycle theory uses a neoclassical growth framework to study the economic fluctuations associated with the business cycle. Presenting advances in dynamic economic theory and computational methods, it applies concepts to t
Book Synopsis Dynamic Models and Structural Estimation in Corporate Finance by : Ilya A. Strebulaev
Download or read book Dynamic Models and Structural Estimation in Corporate Finance written by Ilya A. Strebulaev and published by Now Pub. This book was released on 2012-10-02 with total page 174 pages. Available in PDF, EPUB and Kindle. Book excerpt: The goals of this monograph are to explain the models and techniques and make it more accessible, introduce the main strands of this literature, and explain how dynamic models can be taken to the data and estimated, providing a guide to 3 methodologies: generalized method of moments, simulated method of moments, and maximum simulated likelihood.
