Flexible Prices and the Business Cycle

Relative Prices and the Business Cycle

Business - cycle consumption risk and asset prices ∗

We disaggregate consumption growth into components with different levels of persistence and show that a single business-cycle consumption factor can explain satisfactorily the differences in risk premia across book-to-market and size-sorted portfolios. We argue that accounting for persistence heterogeneity in consumption is important for interpreting cross-sectional risk compensations in financ...

Money, Prices, Interest Rates and the Business Cycle

The mechanisms governing the relationship of money, prices and interest rates to the business cycle are one of the most studied and most disputed topics in macroeconomics. In this paper, we first document key empirical aspects of this relationship. We then ask how well three benchmark rational expectations macroeconomic models – a real business cycle model, a sticky price model and a liquidity ...

Business Cycle Features In The Iranian Economy

Using Micro Data on Prices to Improve Business Cycle Models

I embed the pricing model proposed by Dixon and Kara (2011a, b) (i.e. a Generalized Taylor Economy (GTE)) into a state of the art instance of New Keynesian economics (e.g. Christiano, Eichenbaum and Evans (2005) and Smets and Wouters (2007)). The GTE is built to account for one of the most important features of the data: heterogeneity in price spells. I estimate the resulting model for the US u...