The authors’ findings support the view that weather has a significant, but short-lived, effect on economic activity. Except for a few industries, which are affected importantly (such as utilities, construction, hospitality and to a lesser extent retail), the effect is not very big, so that...

I derive a production-based asset pricing formula to infer aggregate stock market returns from macroeconomic time series when the technology is putty-clay. Capital heterogeneity leads to variation in the aggregate stock market value through a new compositional effect. The asset pricing formula,...

In a recent article, Barro (2006) revives the Rietz explanation of the equity premium. Rietz (1988) showed that infrequent, large drops in consumption make the theoretical equity premium large. Barro shows empirically that in the XXth century, disasters are frequent and large enough, and stock...

To study the long-run effect of dividend taxation on aggregate capital accumulation, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity shocks. We find that a dividend tax cut raises aggregate productivity by reducing the...

Recent work in international finance suggests that the forward premium puzzle can be accounted for if (1) aggregate uncertainty is time-varying, and (2) countries have heterogeneous exposures to a world aggregate shock. We embed these features in a standard two-country real business cycle...

Corporate profits are volatile and highly procyclical in the aggregate, but there is substantial heterogeneity across firms in the extent of this procyclicality: I document that firms with lower productivity or higher book-to-market have more procyclical profits. A simple static profit...

Firms spend significant resources on creating and maintaining long-term customer relationships. We explore the role of this customer capital - a form of intangible capital - for firm valuation and physical investment. We build a general equilibrium model of long-term customer relationships,...

To construct a business cycle model consistent with the observed behavior of asset prices, and study the effect of shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business cycle model. The paper establishes two simple theoretical...

We develop a dynamic general equilibrium model to study the impact of the 2003 dividend and capital gains tax cuts. In the model, firms are heterogeneous in productivity and make investment and financing decisions subject to capital adjustment costs, equity issuance costs, and collateral...

In this appendix, we present the details of the extended model with debt in our paper "Transitional Dynamics of Dividend and Capital Gains Tax Cuts." Section 1 presents the extended model and results. Section 2 presents the numerical algorithm to solve this model. Section 3 presents an...