Can a Time-to-Plan Model explain The Equity Premium Puzzle.

This paper proposes a quantitative evaluation of the time-to-plan technology in order to investigate up to which point this mechanism could constitute a satisfactory alternative to the well-known capital adjustment cost technology. We show that the time-to-plan mechanism reproduces a realistic risk-free rate, whilst being capable of generating a substantial equity premium. About the model's explanation of the business cycle, it turns out that the model predicts a perfectly positive and significant correlation between employment and output.