Asset Pricing Implications of a New Keynesian Model: A Note
20 Pages Posted: 3 Jan 2013
Date Written: December 28, 2012
De Paoli, Scott, and Weeken (2010, Asset pricing implications of a New Keynesian model. Journal of Economic Dynamics and Control 34, 2056-73) study equity and bonds prices in a New Keynesian model with sticky nominal prices. This note argues that their model generates a behavior of the labor market variables that is contrary to empirical evidence and, as remedy for this deficiency, suggests a model with both sticky nominal wages and prices.
Keywords: equity premium, New Keynesian Model, nominal rigidities
JEL Classification: E440, E430, G120
Suggested Citation: Suggested Citation