This paper shows that social security may be an important factor in explaining the equity premium puzzle. In the absence of shortselling constraints, the young shortsell bonds to the middle-aged and buy equity. Social security reduces the bond demand of the middle-aged, thereby restricting the...

This paper is a selective survey of new or recent methods to extract information about market expectations from asset prices for monetary policy purposes. We shall discuss methods to extract market expectations of future interest rates, exchange rates and inflation rates. Traditionally, interest...

We examine the potential importance of consumer ambiguity aversion for asset prices and how consumption ‡fluctuations influence consumer welfare. First, considering a simple Mehra-Prescott-style endowment economy with a representative agent facing consumption fluctuations calibrated to match...