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Asset returns and business cycles in models with investment adjustment costs

  • Beaubrun-Diant, Kevin E.
  • Tripier, Fabien

We show that adjustment cost models with labor supply can explain both asset returns and business cycle facts when adjustment costs penalize the changes of investment. This conclusion stands in contrast to results obtained in the literature with adjustment costs that penalize the changes of capital.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4DDR8JR-8/2/e9e1b5071f7d19e3267980ad2ee31bd1
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 86 (2005)
Issue (Month): 1 (January)
Pages: 141-146

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Handle: RePEc:eee:ecolet:v:86:y:2005:i:1:p:141-146
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. James H. Stock & Mark W. Watson, 1998. "Business Cycle Fluctuations in U.S. Macroeconomic Time Series," NBER Working Papers 6528, National Bureau of Economic Research, Inc.
  2. Gomes, Joao F & Yaron, Amir & Zhang, Lu, 2003. "Asset Prices and Business Cycles with Costly External Finance," CEPR Discussion Papers 3927, C.E.P.R. Discussion Papers.
  3. G. Constantinides, 1990. "Habit formation: a resolution of the equity premium puzzle," Levine's Working Paper Archive 1397, David K. Levine.
  4. Craig Burnside & Martin Eichenbaum & Jonas Fisher, 2003. "Fiscal Shocks and Their Consequences," NBER Working Papers 9772, National Bureau of Economic Research, Inc.
  5. John Y. Campbell, 1998. "Asset Prices, Consumption, and the Business Cycle," NBER Working Papers 6485, National Bureau of Economic Research, Inc.
  6. Michele Boldrin & Lawrence J. Christiano & Jonas D. M. Fisher, 2000. "Habit persistence, asset returns and the business cycle," Staff Report 280, Federal Reserve Bank of Minneapolis.
  7. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
  8. Jermann, Urban J., 1998. "Asset pricing in production economies," Journal of Monetary Economics, Elsevier, vol. 41(2), pages 257-275, April.
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