Equity Returns and Business Cycles in Small Open Economies.

Material TypeArticleLanguageEnglish
TitleEquity Returns and Business Cycles in Small Open Economies. Author(S)MOHAMMAD R. JAHAN-PARVAR, (Author)
Abstract  This is the first paper in the dynamic stochastic general equilibrium literature to match key business cycle moments and long-run equity returns in a small open economy with production. These results are achieved by introducing four modifications to a standard real business cycle model: (i) borrowing and lending costs are imposed to increase the volatility of the marginal rate of substitution over time, (ii) capital adjustment costs are assumed to make equity returns more volatile, (iii) GHH preferences are employed to smooth consumption, and (iv) a working capital constraint to generate countercyclical trade balances. Our results. ...Paginationp 1117-1146
SubjectEconomicsDescriptorsBanks and banking
Journal TitleJournal of Money, Credit, and Banking  
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