Equity Pricing New Keynesian Models with Nominal Rigidities and Investment

Rahul Nath

No 850, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: 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 suffer 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 affect 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)
Date: 2018-05-30
New Economics Papers: this item is included in nep-dge and nep-mac
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