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Idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics

Khan, Aubhik; Thomas, Julia - Federal Reserve Bank of Minneapolis - 2004

investments are lumpy. In partial equilibrium, this yields substantial skewness and kurtosis in aggregate investment, though, with …

Persistent link: https://www.econbiz.de/10005367607

Is lumpy investment relevant for the business cycle?

Thomas, Julia K. - Federal Reserve Bank of Minneapolis - 2002

Previous research has suggested that discrete and occasional plant-level capital adjustments have significant aggregate implications. In particular, it has been argued that changes in plants? willingness to invest in response to aggregate shocks can at times generate large movements in total...

Persistent link: https://www.econbiz.de/10005367617

The equity premium: it's still a puzzle

Kocherlakota, Narayana R. - Federal Reserve Bank of Minneapolis - 1995

The paper examines the literature that attempts to resolve the equity premium and riskfree rate puzzles. It demonstrates that the puzzles will confront any model of asset prices that relies on three crucial assumptions: preferences have a particular parametric form, asset markets are complete,...

Persistent link: https://www.econbiz.de/10005372814

Tobin's Q and asset returns: implications for business cycle analysis

Christiano, Lawrence J.; Fisher, Jonas D.M. - Federal Reserve Bank of Minneapolis - 1995

model incorporates assumptions designed to help account for the observed mean return on risk free and risky assets. We find …

Persistent link: https://www.econbiz.de/10005712353

The international diversification puzzle is not as bad as you think

Heathcote, Jonathan; Perri, Fabrizio - Federal Reserve Bank of Minneapolis - 2007

In simple one-good international macro models, the presence of non-diversifiable labor income risk means that country … good hedge against non-diversifiable labor income risk. We then use our theory to link openness to trade to the level of …

Persistent link: https://www.econbiz.de/10005712359

Efficient non-contractible investments

Cole, Harold L.; Mailath, George J.; Postlewaite, Andrew - Federal Reserve Bank of Minneapolis - 1998

This paper addresses the question of whether agents will invest efficiently in attributes that will increase their productivity in subsequent matches with other individuals. We present a two-sided matching model in which buyers and sellers make investment decisions prior to a matching stage....

Persistent link: https://www.econbiz.de/10005712385

Time-varying risk and international portfolio diversification with contagious bear markets

Santis, Giorgio De; Gerard, Bruno - Federal Reserve Bank of Minneapolis - 1995

parameterization recently proposed by Ding and Engle (1994), we allow risk premia, betas, and correlations to very through time and … that world-wide risk is priced whereas country-specific risk is not. Further, we find that the price of world risk is time …-varying and has a strong January seasonal. When the price of risk is allowed to vary, a January dummy and the world dividend yield …

Persistent link: https://www.econbiz.de/10005712947

Plant level irreversible investment and equilibrium business cycles

Veracierto, Marcelo - Federal Reserve Bank of Minneapolis - 1997

This paper studies a version of the neoclassical growth model where heterogeneous establishments are subject to partial irreversibilities in investment. Under such investment technology, the optimal decision rules of establishments are of the (S,s) variety. A novel contribution of the paper is...

Persistent link: https://www.econbiz.de/10005498991

On the robustness of herds

Chari, V. V.; Kehoe, Patrick J. - Federal Reserve Bank of Minneapolis - 2002

Herd behavior is argued by many to be present in many markets. Existing models of such behavior have been subjected to two apparently devastating critiques. The continuous investment critique is that in the basic model herds disappear if simple zero-one investment decisions are replaced by the...

Persistent link: https://www.econbiz.de/10005526359

Financial crises as herds

Chari, V. V.; Kehoe, Patrick J. - Federal Reserve Bank of Minneapolis - 2000

Persistent link: https://www.econbiz.de/10005427785