Distortionary income taxation in a standard New Keynesian model substantially increases the nominal term-premium on long-term bonds relative to a model with lumpsum taxes. Also the empirical level of the nominal term premium can be matched with lower risk-aversion coefficient in case of a model...

We introduce costly firm-entry a la Bilbiie et al. (2012) into a New Keynesian model with Epstein-Zin preferences and show that it can jointly account for a high mean value of bond and equity premium without compromising the fit of the model to first and second moments of key macroeconomic...

We study the asset-pricing implications of changes in the variety of consumption goods which happens through free entry and exit of rms. Fluctuations in varieties drive a wedge between the measured and model-based (including variety growth) consumer price index making the pricing kernel as well...

We study the nexus between endogenous growth and asset prices. We show that endogenous growth models with either horizontal and vertical innovation match financial data well due to countercyclical dividends which are either procyclical or acyclical in US data. Countercyclical dividends...

We study the asset-pricing implications of changes in the variety of consumption goods which happens through free entry and exit of firms. Fluctuations in varieties drive a wedge between the measured and model-based (including variety growth) consumer price index making the pricing kernel as...