, homoskedastic macroeconomic dynamics. Consumers' first-order condition for the real risk-free bond generates an exactly loglinear … output gap switched from negative to positive in 2001. Higher inflation lowers real bond returns and higher output raises … stock returns, explaining why the bond-stock return correlation changed from positive to negative. In the model risk premia …

with habit formation preferences that prices both bonds and stocks. The model attributes the increase in bond risks in the … 1980s to a shift towards strongly anti-inflationary monetary policy, while the decrease in bond risks after 2000 is …. Endogenous responses of bond risk premia amplify these effects of monetary policy on bond risks …

the bond and loan market directly affect current goods demand. The credit channel amplifies the output effects of isolated …This paper integrates a money and credit market into a static approximation of the baseline New Keynesian model based … on a money-and-credit-in-the-utility approach, in which real balances and borrowing contribute to the household’s utility …