Business Cycles, Asset Prices, and the Frictions of Capital and Labor
Hirokazu Mizobata (hmizobata@tezukayama-u.ac.jp) and
Hiroki Toyoda (toyoda@kier.kyoto-u.ac.jp)
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Hirokazu Mizobata: Faculty of Economics, Tezukayama University
Hiroki Toyoda: Institute of Economic Research, Kyoto University
No 953, KIER Working Papers from Kyoto University, Institute of Economic Research
Abstract:
We propose a simple real business cycle model to explain two of the most important aspects of macroeconomics: business cycle facts and the asset pricing mechanism. Based on US and Japanese quarterly data, we estimate the model with capital and labor adjustment costs. Our analysis reveals that this simple model can explain the key business cycle facts, even without other frictions such as sticky prices, sticky wages, and search and matching frictions. Furthermore, this simple model also has explanatory power for whether a stock price will increase or decrease. However, this feature of the model is weaker for the Great Recession in the US economy.
Keywords: Adjustment costs; DSGE model; Bayesian estimation; Stock price forecasting (search for similar items in EconPapers)
JEL-codes: C32 E13 E32 E37 (search for similar items in EconPapers)
Pages: 34pages
Date: 2016-11
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:953
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