The Rate of Return on Everything, 1870–2015

Jordà, Òscar; Knoll, Katharina; Kuvshinov, Dmitry; Schularick, Moritz; Taylor, Alan M.

doi:10.3386/w24112

Cited by 86 publications

(71 citation statements)

References 75 publications

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“…The resulting value of 2.49 for the mean risk‐free rate lies well within the values of 3.34 reported by Campbell () and 1.51 reported by Jordà et al . (). Moreover, since numerical evaluations show that variations in the discount factor β mainly shift the risk free rate with only moderate effects on the equity premium and the business cycle statistics, our results are not particularly sensitive to the chosen risk‐free target rate.…”

Section: Numerical Frameworkmentioning

confidence: 97%

“…In particular, a recent study of global returns by Jordà et al . (), using data from 16 advanced economies over the period 1870–2015, reports an average equity premium of 5.91%. The standard real business cycle (RBC) model, however, predicts an equity premium of only 0.02% according to Jermann ().…”

Section: Introductionmentioning

confidence: 99%

“…(), Backus and Kehoe (), Basu and Taylor (), Brandner and Neusser (), Hodrick and Prescott (), Jordà et al . () and Maußner ().…”

mentioning

confidence: 99%

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Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited

Heiberger

Ruf

2019

German Economic Review

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This paper discusses the advantages of Epstein and Zin (1989) (EZ) preferences when building dynamic stochastic general equilibrium (DSGE) models that are consistent with well‐known stylized facts of both the business cycle and asset markets. To this end, we combine EZ preferences with several building blocks from the DSGE literature that has tried to solve the equity premium puzzle and to replicate characteristic statistics of the labor market. Our goal is to guide researchers in this area to useful modeling devices and to discuss EZ preferences vis‐a‐vis the standard time‐additive expected utility function. EZ preferences separate the attitude toward risk from the attitude toward intertemporal substitution. We demonstrate that this additional degree of freedom allows us to closely match the empirical facts already in a frictionless production economy with endogenous labor supply. Our study follows Heer and Maußner (2013). We examine models that consider adjustment costs of capital accumulation, consumption habits, and frictions in the allocation of labor. Our empirical targets are estimated from German data.

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Section: Numerical Frameworkmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

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Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited

Heiberger

Ruf

2019

German Economic Review

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“…From Mitnitski et al (2002), I take the estimate for the rate of aging, = 0.043. I set r to 0.07 according to the long-run real interest rate (Jorda, Knoll, Kuvshinov, Schularick, & Taylor, 2017) and = r as in Dalgaard and Strulik (2014). In the year 2010, the average life expectancy of a 20-year-old American male was 57.1 years, that is, the expected age at death was 77.1 (NVSS, 2014).…”

Section: Appendix B : Details Of the Calibrationmentioning

confidence: 99%

Limited self‐control and longevity

Strulik

2018

Health Economics

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This paper proposes a new framework to discuss self-control problems in the context of life-cycle health and longevity. Individual decisions are conceptualized as the partial control of impulsive desires of a short-run self by a rationally forward-looking long-run self. The short-run self strives for immediate gratification through consumption of health-neutral and unhealthy goods. The long-run self reflects the long-term consequences of unhealthy behavior on health outcomes and longevity and invests time and money to improve current and future health. The model is calibrated with data from the United States and used to provide an assessment of the impact of imperfect self-control on unhealthy consumption, health investments, lifetime health, and the age at death.

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“…In order to test this mechanism, and in particular the existence of a circular relationship between real interest rates and TFP growth, we take a long run view. We first rely on the Long Term Productivity database built by Bergeaud et al (2016) which provides comparable cross-country TFP estimates from the end of the 19th century, and on the work of Jordà et al (2017) and in particular their Macrohistory database which provides yearly average values for long-term interest rates. We estimate this circular relationship by cross-country panel regressions using annual data on a sample of 17 advanced countries over the period 1950-2017.…”

Section: Introductionmentioning

confidence: 99%

The Circular Relationship Between Productivity Growth and Real Interest Rates

2019

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In most advanced economies, both real interest rates and productivity growth have decreased since the early 1990s. In this paper, we explore the mechanism whereby a circular relationship links these two quantities. While productivity is a key driver of potential output which affects the level of interest rates, the level of interest rates is a determinant of the expected return from investment projects, and thus of the productivity level required for investment. In our model, absent of a technology shock, this specific relationship can only converge to an equilibrium where growth and interest rates are both low. We test this using macroeconomic data on 17 OECD countries and simulate the effect of a temporary productivity shock. RÉSUMÉDans la plupart des pays avancés, les taux d'intérêt réels et la croissance de la productivité ont décru depuis le début des années 1990. Dans ce papier, nous explorons le mécanisme par lequel une relation circulaire lie ces deux indicateurs. Alors que la productivité est un déterminant de la croissance potentielle et affecte donc le niveau des taux d'intérêt, le niveau des taux est un déterminant du rendement attendu des projets d'investissement et ainsi du niveau de productivité requis pour de tels investissements. Dans notre modèle, en l'absence de choc technologique, cette relation spécifique ne peut converger que vers un équilibre où taux d'intérêt et croissance sont bas. Nous testons cette relation en utilisant des données macroéconomiques sur 17 pays de l'OCDE et simulons l'effet d'un choc de productivité temporaire. Mots-clés : Productivité, Ralentissement, Stagnation Séculaire, Taux d'IntérêtLes Documents de travail reflètent les idées personnelles de leurs auteurs et n'expriment pas nécessairement la position de la Banque de France. Ils sont disponibles sur publications.banque-france.fr

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The Rate of Return on Everything, 1870–2015

Cited by 86 publications

References 75 publications

Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited

Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited

Limited self‐control and longevity

The Circular Relationship Between Productivity Growth and Real Interest Rates

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