Persistence risk is an endogenous source of risk that arises when a rational agent learns about the length of business … cycles. Persistence risk is positive during recessions and negative during expansions. This asymmetry, which solely results … from learning about persistence, causes expected returns, return volatility, and the price of risk to rise during …

first-order approximated solution built by perturbation methods accounts for risk. We show that risk matters economically in … a real business cycle (RBC) model with habit formation and capital adjustment costs and that neglecting risk leads to …

This paper studies the impact of financial sector size and leverage on business cycles and risk-free rates dynamics. We … model a general equilibrium productive economy where financial intermediaries provide costly risk mitigation to households … intermediaries' relative size, but may also mitigate the business cycle. Moreover, it makes risk-free rates pro-cyclical. Households …

first-order approximated solution built by perturbation methods accounts for risk. We show that risk matters economically in … a real business cycle (RBC) model with habit formation, and capital adjustment costs and that neglecting risk leads to …

, cannot pool their idiosyncratic risks. Financial intermediaries provide costly risk pooling by issuing safe assets via … assets provision generate pro- or counter-cyclical real risk-free rates …