Asset Prices in Affine Real Business Cycle Models
´¡³Ü³Ù³ó´Ç°ù:ÌýMalkhozov,ÌýAytek
±Ê³Ü²ú±ô¾±³¦²¹³Ù¾±´Ç²Ô:ÌýJournal of Economic Dynamics and Control, Forthcoming
Abstract:
I describe a tractable way to study macroeconomic quantities and asset prices in a large class of dynamic stochastic general equilibrium models. The proposed approximate solution is analytical, log-linear, and adjusted for risk. Therefore, it is well suited to investigate economic mechanisms, describe the time series properties or estimate the model, and deal with stochastic volatility. I explain the pitfalls encountered by previous attempts to use simple approximation techniques, in particular with models featuring recursive preferences. Finally, I show the theoretical relationship between my solution and higher-order perturbation methods.