The equity risk premium (ERP) in BRIC markets is, on average, significantly higher than that in the US market. This paper employs an endowment economy with recursive preferences and long-run risk to explain the ERP generated by a portfolio of BRIC equity indices. The combination of recursive...

This paper contributes to the ongoing debate on the relationship between austerity measures and economic growth. We propose a general equilibrium model where (i) agents have recursive preferences; (ii ) economic growth is endogenously driven by investments in R&D; (iii) the government is...

Germany entered the euro with a current account deficit but over the entire past decade has run large and persistent current account surpluses. Besides joining the common currency, the increase of Germany’s current account since the late 1990s has been accompanied by strong shifts in the...

This paper studies a two-country production economy with complete and frictionless financial markets and international trade of final goods in which competition in R&D leads to endogenous new firm creation and economic growth. Current monopolists ("incumbents") and potential new firms...

We analyze the equilibrium in a two-tree (sector) economy with two regimes. The output of each tree is driven by a jump-diffusion process, and a downward jump in one sector of the economy can (but need not) trigger a shift to a regime where the likelihood of future jumps is generally higher....

This article studies the effects of the global integration process on emerging stock market excess returns in a dynamic context. I improve the existing literature in four main directions. First, I show that the average excess returns rise as the level of financial and real integration rises....

The US–China data suggest that (i) the real exchange rate (RER) volatility puzzle (high RER volatility relative to consumption volatility), (ii) the Backus–Smith anomaly (negative correlation between the RER and consumption differentials), (iii) the consumption correlation puzzle (relatively...

This paper studies the behavior of emerging stock excess returns in an industry-by-industry context. We examine stock market performance for 23 countries and ten industries over 17 years from 1995 to 2012 – a period that includes major changes in capital market regulations, the removal of...