Habit Persistence, Asset Returns, and the Business Cycle
By Michele Boldrin, Lawrence J. Christiano, Jonas D. M. Fisher. 2001
1,084 citations recorded by the source corpus.
Two modifications are introduced into the standard real-business-cycle model: habit preferences and a two-sector technology with limited intersectoral factor mobility. The model is consistent with the observed mean risk-free rate, equity premium, and Sharpe ratio on equity. In addition, its business-cycle implications represent a substantial improvement over the standard model. It accounts for persistence in output, comovement of employment across different sectors over the business cycle, the evidence of "excess sensitivity" of consumption growth to output growth, and the "inverted leading-indicator property of interest rates," that interest rates are negatively correlated with future output.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/88d3cf3b59802170c34c8811ea5cd2e8404f1721
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Citations in the corpus
- What fiscal policy is most effective? A Meta Regression Analysis (2015, result): “3 and longer horizons lead to increased multipliers, a result which is in line with the habit persistence hypothesis of private demand (Boldrin et al. 2001; Brown 1952).”
- Energy, the stock market and the putty-clay investment model (2001, neutral): “Simple manipulations of equation (11) yield the required magnitude of a real wage decrease at α(1− λ) 1− α ( Pt P ∗ − 1 ) .”
- Precautionary savings and wealth distribution under habit formation preferences (2003, result): “The same result is obtained by Heaton (1995), Boldrin et al. (1997, 2001) and Campbell and Cochrane (1999).”
- The Value Premium (2005, neutral): “Normalizing x̄ is standard in the literature (e.g., Cooley and Prescott (1995), Boldrin et al. (2001)). close to those in the data reported by Campbell and Cochrane (1999) and by Campbell, Lo, and MacKinlay (1997).”
- Is The Technology-Driven Real Business Cycle Hypothesis Dead? Shocks and Aggregate Fluctuations Revisted (2005, neutral): “We calibrate the model along the lines of Boldrin et al. (2001), who were trying to match the asset pricing facts.”
- Inventory Investment and the Cost of Capital (2013, methodology): “Cooley and Prescott (1995) use 1.6%, Boldrin, Christiano, and Fisher (2001) use 2.1%, and Kydland and Prescott (1982) use a 2.5% quarterly depreciation rate.”
- Firm-specific capital, nominal rigidities and the business cycle (2011, neutral): “This value is reasonably close to the point estimate of 0.66, reported in CEE (2005) and the value of 0.7 reported in Boldrin et al. (2001).”
- Habit Formation and Macroeconomic Models of the Term Structure of Interest Rates (2007, background): “King and Watson (1996) and Boldrin et al. (2001) view the lead-lag relationships among consumption, output, and interest rates as an important challenge to standard models with time-separable preferences, such as that proposed by Cos, Ingersoll, and”
- Firm-Level Productivity, Risk, and Return (2014, neutral): “Cooley and Prescott (1995) use 1.6%; Boldrin, Christiano, and Fisher (2001) use 2.1%; and Kydland and Prescott (1982) use a 2.5% quarterly depreciation rate.”