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Macrodynamic and Financial Effects of a Large-Scale Technology Change

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  • Natalia Gershun

    (Department of Finance and Economics, Pace University, U.S.A.)

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    Abstract

    We examine the implications of technological change which results in large-scale capital depreciation for the macrodynamic and financial properties of a dynamic general equilibrium model. In an economy where investors fear a capital-devaluing change in technology, the introduction of the possibility of such an event helps to resolve the equity premium and risk-free rate puzzles.

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    Bibliographic Info

    Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

    Volume (Year): 3 (2004)
    Issue (Month): 1 (April)
    Pages: 67-81

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    Handle: RePEc:ijb:journl:v:3:y:2004:i:1:p:67-81

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    Postal: 100 Wenhwa Road, Seatwen, Taichung
    Web page: http://www.ijbe.org/
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    Related research

    Keywords: general equilibrium; asset pricing; technology shocks;

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    1. Philippe Weil, 1989. "The Equity Premium Puzzle and the Riskfree Rate Puzzle," NBER Working Papers 2829, National Bureau of Economic Research, Inc.
    2. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 257-275, April.
    3. Brock, William A. & Mirman, Leonard J., 1972. "Optimal economic growth and uncertainty: The discounted case," Journal of Economic Theory, Elsevier, vol. 4(3), pages 479-513, June.
    4. Stephen G. Cecchetti & Pok-sang Lam & Nelson C. Mark, 1998. "Asset Pricing with Distorted Beliefs: Are Equity Returns Too Good To Be True?," NBER Working Papers 6354, National Bureau of Economic Research, Inc.
    5. Danthine, Jean-Pierre & Donaldson, John B, 1999. "Non-falsified Expectations and General Equilibrium Asset Pricing: The Power of the Peso," Economic Journal, Royal Economic Society, vol. 109(458), pages 607-35, October.
    6. Hansen, Gary D., 1985. "Indivisible labor and the business cycle," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 309-327, November.
    7. Rietz, Thomas A., 1988. "The equity risk premium a solution," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 117-131, July.
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