Economics at your fingertips  

Stock market and investment good prices: implications of macroeconomics

Lawrence Christiano () and Jonas Fisher ()

No WP-98-6, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Stock market prices are procyclical, while investment good prices are countercyclical. A real business cycle model calibrated to these observations implies that 75% of the cyclical variation in aggregate output is due to an investment-specific technology shock, while the rest is due to an aggregate productivity shock. To test this conclusion, we investigate the model's implications for asset prices and business cycles. The model does not do significantly worse than existing models on these dimensions, and on two dimensions it does notably better. It is consistent with the facts: (i) employment and investment across different sectors comove over the business cycle: and (ii) high interest rates lead low aggregate output. Fact (ii) is often interpreted as reflecting the business cycle effects of monetary policy shocks. Our result suggest that (ii) may, at least to some extent, also reflect the effects of real shocks.

Keywords: Stock - Prices; Investments (search for similar items in EconPapers)
Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (14) Track citations by RSS feed

Downloads: (external link) ... pers/1998/wp98_6.pdf (application/pdf)

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:

Ordering information: This working paper can be ordered from
http://www.chicagofe ... ation_order_form.cfm

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of Chicago Contact information at EDIRC.
Bibliographic data for series maintained by Bernie Flores ().

Page updated 2019-09-14
Handle: RePEc:fip:fedhwp:wp-98-6