We develop a tractable way to solve for equilibrium quantities and asset prices in a class of real business cycle models featuring Epstein-Zin preferences and affine dynamics for productivity growth and volatility. The method relies on log-linearization and exploits the log-normality of all the...

Previous equilibrium "business cycle" models are extended by the incorporation of an economy-wide capital market. One aspect of this ex-tension is that the relative price that appears in commodity supply and demand functions becomes an anticipated real rate of return on earning assets, rather...

The risk premium puzzle is even worse than previously reported if housing is also taken into consideration next to equity. While housing premia are only moderately smaller than equity premia, they are significantly less volatile and the Sharpe ratio of housing is significantly larger. Hence,...

We describe a tractable way to jointly study macroeconomic quantities, welfare and asset prices in real business cycle models featuring affine structure of shocks and Epstein-Zin-Weil preferences. Our solution is analytical, log-linearized and adjusted for risk by exploiting log-normality....

Previous equilibrium "business cycle" models are extended by the incorporation of an economy-wide capital market. One aspect of this ex-tension is that the relative price that appears in commodity supply and demand functions becomes an anticipated real rate of return on earning assets, rather...

This paper derives approximate analytical solutions for various financial assets in the production economy with monetary shocks. Both technology and monetary shocks drive the dynamics of various financial assets. Special cases of permanent and transitory shocks are considered.The solutions based...