Some recent empirical evidence suggests that stock prices are not properly modelled as the present discounted value of expected dividends. In this paper we estimate a present value model of stock price that is capable of explaining the observed long-term trends in stock prices. The model...

What are the economic effects of an interest rate cut when an economy is in the midst of a financial crisis? Under what conditions will a cut stimulate output and employment, and raise welfare? Under what conditions will a cut have the opposite effects? We answer these questions in a general...