2009
DOI: 10.1016/j.rfe.2009.08.001
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Habit persistence, impediments to production factor adjustments, and asset returns in general equilibrium models with self‐fulfilling expectations

Abstract: I examine asset returns in the context of real dynamic stochastic general equilibrium economies with multiple equilibria (indeterminacy) that allow for aggregate fluctuations due to non‐fundamental belief shocks. The two models include habit formation in preferences. Model 1 combines restrictions on factor mobility and adjustment costs in a one‐sector economy. Model 2 uses restrictions on factor mobility in a two‐sector economy. Results demonstrate that Model 1 fails to match the stylized financial facts. Mode… Show more

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Cited by 4 publications
(6 citation statements)
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“…The value of falls within the 1 to 5 range, which is again generally considered reasonable by many economists (e.g. Jermann, 1998;Carceles-Poveda, 2003;and Gershun, 2010). In the sensitivity analysis, we vary between 0 and 100.…”
Section: Calibrationmentioning
confidence: 73%
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“…The value of falls within the 1 to 5 range, which is again generally considered reasonable by many economists (e.g. Jermann, 1998;Carceles-Poveda, 2003;and Gershun, 2010). In the sensitivity analysis, we vary between 0 and 100.…”
Section: Calibrationmentioning
confidence: 73%
“…Given this economic friction, the elasticity of investment is expected to be lower than in a model without CAC. Specifically, we follow Gershun (2010) and set…”
Section: The Manager Objective Function and The Capital Accumulation mentioning
confidence: 99%
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