TY  - JOUR
AU  - Boldrin,Michele
AU  - Christiano,Lawrence J.
AU  - Fisher,Jonas D.M.
TI  - Asset Pricing Lessons for Modeling Business Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5262
PY  - 1995
Y2  - September 1995
UR  - http://www.nber.org/papers/w5262
L1  - http://www.nber.org/papers/w5262.pdf
N1  - Author contact info:
Michele Boldrin
Department of Economics
Washington University
Campus Box 1208
St. Louis, MO 63130-4899
E-Mail: micheleboldrin@gmail.com

Lawrence Christiano
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208
Tel: 847/491-8231
Fax: 847/491-7001
E-Mail: l-christiano@northwestern.edu

Jonas Fisher
Economic Research Department
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL  60604
Tel: 312/312-8177
Fax: NA
E-Mail: jfisher@frbchi.org
AB  - We develop a model which accounts for the observed equity premium and average risk free rate, without implying counterfactually high risk aversion.  The model also does well in accounting for business cycle phenomena.  With respect to the conventional measures of business cycle volatility and comovement with output, the model does roughly as well as the standard business cycle model.  On two other dimensions, the model's business cycle implications are actually improved.  Its enhanced internal propagation allows it to account for the fact that there is positive persistence in output growth, and the model also provides a resolution to the 'excess sensitivity puzzle' for consumption and income.  Key features of the model are habit persistence preferences, and a multisector technology with limited intersectoral mobility of factors of production.
ER  -