Discount Rates and Employment Fluctuations

Katarina Borovickova and Jaroslav Borovička
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Katarina Borovickova: New York University

No 1428, 2017 Meeting Papers from Society for Economic Dynamics

Abstract: We study the role of fluctuations in discount rates for the joint dynamics of expected returns in the stock market and employment dynamics. We construct a stochastic discount factor with a time-varying compensation for risk, and analyze the pricing of cash flows earned by stock market investors and firms hiring workers. Decomposition of the value of a job to the firm into its stochastic components and cash flows earned at alternative maturities yields insights for the understanding of firms' incentives to hire workers in frictional labor markets.

Date: 2017
New Economics Papers: this item is included in nep-mac
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Working Paper: Discount rates and employment fluctuations (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed017:1428

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