Equity Returns and Business Cycles in Small Open Economies

Mohammad R. Jahan‐parvar, Xuan Liu and Philip Rothman ()
Authors registered in the RePEc Author Service: Mohammad Reza Jahan-Parvar

Journal of Money, Credit and Banking, 2013, vol. 45, issue 6, 1117-1146

Abstract: This is the first paper in the dynamic stochastic general equilibrium literature to match key business cycle moments and long‐run equity returns in a small open economy with production. These results are achieved by introducing four modifications to a standard real business cycle model: (i) borrowing and lending costs are imposed to increase the volatility of the marginal rate of substitution over time, (ii) capital adjustment costs are assumed to make equity returns more volatile, (iii) GHH preferences are employed to smooth consumption, and (iv) a working capital constraint to generate countercyclical trade balances. Our results are based on data from Argentina, Brazil, and Chile.

Date: 2013
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Citations: View citations in EconPapers (3)

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https://doi.org/10.1111/jmcb.12046

Related works:
Journal Article: Equity Returns and Business Cycles in Small Open Economies (2013)
Working Paper: Equity Returns and Business Cycles in Small Open Economies (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:45:y:2013:i:6:p:1117-1146

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