Equity Pricing New Keynesian Models with Nominal Rigidities and Investment
No 850, Economics Series Working Papers from University of Oxford, Department of Economics
This paper derives explicitly an equity pricing relationship in a simple New Keynesian model. This relationship is used to study the equity pricing implications of New Keynesian models. I ï¬ nd that New Keynesian models suï¬€er from the same asset pricing shortcomings as more traditional RBC versions and that this can be attributed to the presence of nominal rigidities. I then add capital adjustment costs to study how the interaction of both investment adjustment costs and capital adjustment costs aï¬€ect the results.
Keywords: Asset Pricing; New Keynesian; Nominal Rigidities; Investment Adjustment Costs; Capital Adjustment Costs (search for similar items in EconPapers)
JEL-codes: E12 E22 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
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