Revisiting the interest rate puzzle

Joe Yoshino and Edson Bastos e Santos

Applied Economics Letters, 2009, vol. 16, issue 13, 1333-1340

Abstract: This article makes a connection between Lucas' (1978) asset pricing model and the macroeconomic dynamics for some selected countries. Both the relative risk aversion and the impatience for postponing consumption by synthesizing the investor behaviour can help to understand some key macroeconomic issues across countries, such as the savings decision and the real interest rate. I find that the government consumption makes worse the so-called 'equity premium-interest rate puzzle'. The first root of the quadratic function for explaining the real interest rate can produce this puzzle, but not the second root. Thus, Mehra and Prescott (1985) identified only one possible solution.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:16:y:2009:i:13:p:1333-1340

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/17446540802403643

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().