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Labor Rigidity, In ation Risk and Bond Returns

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  • Roberto Marfè

Abstract

This paper exploits information from the variance-ratios of macroeconomic variables to infer about the short and long-run components of dividend risk and in ation risk. While labor rigidity shifts dividend risk towards the short horizon, it also reveals {by means of labor-share variation{ the component of in ation risk which is correlated with fundamentals. A simple general equilibrium model with labor rigidity can explain how in ation interacts with the real growth and the labor-share, as well as many patterns of the term-structures of real and nominal bond yields. The model is robust to many properties of equity returns.

Suggested Citation

  • Roberto Marfè, 2016. "Labor Rigidity, In ation Risk and Bond Returns," Carlo Alberto Notebooks 461, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:461
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    More about this item

    Keywords

    labor rigidity; in ation; term-structure; interest rates; equilibrium asset pricing;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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