This article studies the asset pricing and the business cycle implications of habit formation in a production economy …. This mechanism enhances the model’s ability to explain asset pricing puzzles. …

asset pricing theory to estimate this implicit price in the data and find that the optimal tax is pro-cyclical. It is …

This article studies the asset pricing and the business cycle implications of habit formation in a production economy …. This mechanism enhances the model's ability to explain asset pricing puzzles …

consumption. Our first result is that the optimal tax is determined by the shadow price of CO2 emissions. We then use asset-pricing …