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Asset Returns and Labor Supply in a Production Economy
Author(s) -
JACCARD IVAN
Publication year - 2014
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12133
Subject(s) - business cycle , economics , volatility (finance) , capital asset pricing model , stochastic discount factor , asset (computer security) , microeconomics , production (economics) , econometrics , macroeconomics , computer science , computer security
The introduction of an endogenous labor decision represents a challenge for models that seek to jointly explain asset pricing and business cycle facts. This paper shows that several improvements can be made if a standard real business cycle model is augmented with a novel preference specification that increases the stochastic discount factor volatility and simultaneously reduces the wealth elasticity of labor supply.