Long-Term Asset Price Volatility and Macroeconomic Fluctuations

Manuel Santos and Miguel Iraola

No 559, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: Price markups are highly correlated with stock market values, whereas other financial measures of profitability exhibit much less variability and are weakly correlated with stock values. We propose a variant of the neoclassical growth model to study the role of innovation, price markups, and leverage as main determinants of stock market volatility. The model confers a rather limited role to other macroeconomic forces such as TFP shocks, adjustment costs, interest rate policies, input costs, taxes, and labor and financial frictions. We develop some numerical methods to provide a variance decomposition of stock market values.

Date: 2014
New Economics Papers: this item is included in nep-dge and nep-mac
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Related works:
Working Paper: Long-Term Asset Price Volatility and Macroeconomic Fluctuations (2010)
Working Paper: Long-Term Asset Price Volatility and Macroeconomics Fluctations (2009)
Working Paper: Long Term Asset Price Volatility and Macroeconomic Fluctuations (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:559

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