Business Cycle and Asset Prices:A Computable General Equilibrium Analysis with Agency Costs and Habit Formation
3
조회
0
다운로드
0
인용
0
참고문헌
키워드
초록
For the purpose of explaining both business cycles and asset returns, we examine a real business cycle (RBC) model with habit-augmented preferences and endogenous costs of adjusting the capital stock. Following the agency-cost model of Carlstrom and Fuerst (1997), capital adjustment costs are affected by the level of entrepreneur’s net worth such that an increase in net worth (following a positive productivity shock) lowers agency costs associated with external financing, and hence makes it easier to expand the capital stock. Along with the restricted labor supply,the model resolves the asset pricing puzzles of the consumption-based model in the sense that the implied stochastic discount factor (or pricing kernel) reaches the Hansen-Jagannathan(1991) volatility bound. Further, this improvement in the asset pricing dimension is achieved without reducing its business cycle performance such as output and consumption volatility. This is in a sharp contrast to the standard RBC model with the reduced-form adjustment cost technology where sufficiently low supply elasticity of capital (or persistently high capital adjustment costs) is required to generate the equity premium at the expense of low output volatility. Here, the capital supply is highly elastic with respect to Tobin’s q under the plausible calibrations of the structural parameters affecting endogenous capital adjustment costs. The sluggish behavior of net worth, as a shifter of the capital supply curve, is the key mechanism by which capital adjustment is delayed, hampering consumption smoothing desired by households with habit persistence preferences. The agency-costs model reveals that a small curvature in the capital adjustment cost function, viewed as crucial for understanding the fluctuations in Tobin’s q, can be also consistent with both the historical equity premium and the key business cycle facts.
Abstract
For the purpose of explaining both business cycles and asset returns, we examine a real business cycle (RBC) model with habit-augmented preferences and endogenous costs of adjusting the capital stock. Following the agency-cost model of Carlstrom and Fuerst (1997), capital adjustment costs are affected by the level of entrepreneur’s net worth such that an increase in net worth (following a positive productivity shock) lowers agency costs associated with external financing, and hence makes it easier to expand the capital stock. Along with the restricted labor supply,the model resolves the asset pricing puzzles of the consumption-based model in the sense that the implied stochastic discount factor (or pricing kernel) reaches the Hansen-Jagannathan(1991) volatility bound. Further, this improvement in the asset pricing dimension is achieved without reducing its business cycle performance such as output and consumption volatility. This is in a sharp contrast to the standard RBC model with the reduced-form adjustment cost technology where sufficiently low supply elasticity of capital (or persistently high capital adjustment costs) is required to generate the equity premium at the expense of low output volatility. Here, the capital supply is highly elastic with respect to Tobin’s q under the plausible calibrations of the structural parameters affecting endogenous capital adjustment costs. The sluggish behavior of net worth, as a shifter of the capital supply curve, is the key mechanism by which capital adjustment is delayed, hampering consumption smoothing desired by households with habit persistence preferences. The agency-costs model reveals that a small curvature in the capital adjustment cost function, viewed as crucial for understanding the fluctuations in Tobin’s q, can be also consistent with both the historical equity premium and the key business cycle facts.
참고문헌 (33)
- Abel, A., "Empirical Investment Equations: An Integrative Framework", Carnegie-Rochester Conference Series on Public Policy, 통권 : 12, pp.39~91 (1980)
- Alderson, M. J., "Liquidation Costs and Capital Structure" (1995), St. Louis University
- Altman, E. J., "A Further Investigation of the Bankruptcy Cost Question", Journal of Finance, 39(4), pp.1067~1089 (1984)
- Andolfatto, D., "Business Cycles and Labor-Market Search", American Economic Review, 86(1), pp.112~132 (1996)
- Bernanke, B., "Agency Costs, Net Worth, and Business Fluctuations", American Economic Review, 79(1), pp.14~31 (1989)
- Boldrin, M., "Habit Persistence, Asset Returns and the Business Cycle", American Economic Review, 91(1), pp.149~166 (2001)
- Burnside, C., "Labor hoarding and the business cycle", Journal of Political Economy, 101(2), pp.245~273 (1993)
- Burnside, C., "Factor-hoarding and the propagation of business-cycle shocks", American Economic Review, 86(5), pp.1154~1174 (1996)
- Campbell, J. Y., "By Force of Habit: A Consumption-Based Expla-nation of Aggregate Stock Market Behavior", Journal of Political Economy, 107, pp.205~251 (1999)
- Carlstrom, C. T., "Agency Costs, Net Worth, and Business Fluctua-tions: A Computable General Equilibrium Analysis", American Economic Review, 87(5), pp.893~910 (1997)
- Christiano, L.J., "Why Does Inventory Investment Fluctuate So Much?", Journal of Monetary Economics, 21, pp.247~280 (1988)
- Stock Market and Investment Good Prices: Im-plications for Macroeconomics, "Christiano, L. J.", ~, pp.Federal Reserve Bank of Chicago Working Paper, 98-6 (1998)
- Cochrane, J.H., "Asset Pricing Explorations for Macroeconomics", pp.115~165 (1992), 1992 NBER Macroeconomics Annual
- Cogley, T., "Impulse Dynamics and Propagation Mechanisms in a Real Business Cycle Model", Economics Letters, 43(1), pp.77~81 (1993)
- Cogley, T., "Output Dynamics in Real-Business-Cycle Models", American Economic Review, 85(3), pp.492~511 (1995)
- Constantinides, G., "Habit Formation: A Resolution of the Equity Premium Puzzle", Journal of Political Economy, 98, pp.519~543 (1990)
- Cooley, T. F., "Economic Growth and Business Cycle. in: Frontiers of Business Cycle Research", pp.1~38 (1995), Princeton University Press
- Cummins, J., "Investment Behavior, Observable Expectations, and Internal Funds" (1997), New York University
- den Haan, W. J., "Job Destruction and Propagation of Shocks" (1997), University of California
- Eberly, J. C., "International Evidence on Investment and Fundamentals", European Economic Review, 41(6), pp.1055~1078 (1997)
- Fisher, J., "Relative Prices, Complementarities and Comovement Among Components of Aggregate Expenditures", Journal of Monetary Economics, 39, pp.449~474 (1997)
- Gilchrist, S., "Evidence on the Role of Cash Flow for Investment", Journal of Monetary Economics, 36, pp.541~572 (1995)
- Hansen, G. D., "Indivisible Labor and the Business Cycle", Journal of Monetary Economics, 16, pp.309~327 (1985)
- Hansen, L. P., "Implications of Security Market Data for Models of Dynamic Economies", Journal of Political Economy, 99, pp.225~262 (1991)
- Hayashi, F., "Tobin’s Marginal q and Average q: A Neoclassical Interpretation", Econometrica, 50, pp.215~224 (1982)
- Jermann, U. J., "Asset Pricing in Production Economies", Journal of Monetary Economics, 41, pp.257~276 (1998)
- Lettau, M., "Inspectiing the Mechanism: Closed-Form Solutions for Asset Prices in Real Business Cycle Models", The Economic Journal, 113, pp.550~575 (2003)
- Lettau, M., "Can Habit Formation be Reconciled with Business Cycle Facts?", Review of Economic Dynamics, 3(1), pp.79~99 (2000)
- Lettau, M., "The Sharpe Ratio and Preferences: A Parametric Approach", Macroeconomic Dynamics, 6, pp.242~265 (2002)
- Merz, M., "Search in the Labor Market and the Real Business Cycle", Journal of Monetary Economics, 36(2), pp.269~300 (1995)
- Rotemberg, J. J., "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours and Consumption", American Economic Review, 86(1), pp.71~89 (1996)
- Uhlig, H., "A Toolkit for Solving Dynamic Stochastic Models Easily. in: Computational Methods for the Study of Economic Dynamics" (1999), Oxford University Press
- Williamson, S.D., "Recent Developments in Modeling Financial Intermediation", Federal Reserve Bank of Minneapolis Quarterly Review, 11, pp.19~29 (1987)