Macroeconomic Risks and Asset Pricing: Evidence from a Dynamic Stochastic General Equilibrium Model

2019 ◽  
Vol 65 (8) ◽  
pp. 3585-3604 ◽  
Author(s):  
Erica X. N. Li ◽  
Haitao Li ◽  
Shujing Wang ◽  
Cindy Yu
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Factor Model ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Model ◽  
Cross Sectional ◽  
Dynamic Stochastic ◽  
Monetary Policy Shock ◽  
Macroeconomic Risks

We study the relation between macroeconomic fundamentals and asset pricing through the lens of a dynamic stochastic general equilibrium (DSGE) model. We provide full-information Bayesian estimation of the DSGE model using macroeconomic variables and extract the time series of four latent fundamental shocks of the model: neutral technology shock, investment-specific technological shock, monetary policy shock, and risk shock. Asset pricing tests show that our model-implied four-factor model can explain a number of prominent cross-sectional return spreads: size, book-to-market, investment, earnings, and long-term reversal. The investment-specific technological shock and risk shock play the most important role in explaining those return spreads. This paper was accepted by Neng Wang, finance.

ASSET PRICING IN DYNAMIC STOCHASTIC GENERAL EQUILIBRIUM MODELS WITH INDETERMINACY

2007 ◽  
Vol 12 (1) ◽  
pp. 50-71 ◽  
Author(s):  
NATALIA GERSHUN ◽  
SHARON G. HARRISON
Keyword(s):  
Asset Pricing ◽  
General Equilibrium ◽  
Returns To Scale ◽  
Dynamic Stochastic General Equilibrium ◽  
Increasing Returns ◽  
Dsge Model ◽  
Increasing Returns To Scale ◽  
Local Indeterminacy ◽  
Dynamic Stochastic ◽  
The One

We explore asset pricing in the context of the one-sector Benhabib-Farmer-Guo (BFG) model with increasing returns to scale in production and compare our results with financial implications of the standard dynamic stochastic general equilibrium (DSGE) model. Our main goal is to determine the effects of local indeterminacy and the presence of sunspot shocks on asset pricing. We find that the BFG model does not adequately represent key stylized facts of U.S. capital markets and does not improve on the asset-pricing results obtained in the standard DSGE model.

scholarly journals A DSGE-VAR Analysis for Tourism Development and Sustainable Economic Growth

2020 ◽  
Vol 12 (9) ◽  
pp. 3635
Author(s):  
David Alaminos ◽  
Ana León-Gómez ◽  
José Ramón Sánchez-Serrano
Keyword(s):  
Economic Growth ◽  
Tourism Development ◽  
Dynamic Stochastic General Equilibrium ◽  
Long Term Effects ◽  
Dsge Model ◽  
External Effects ◽  
Dynamic Stochastic ◽  
Tourist Demand ◽  
Sustainable Economic Growth

This paper aims to provide a better basis for understanding the transmission connection between tourism development and sustainable economic growth in the empirical scenario of International countries. In this way, we have applied the dynamic stochastic general equilibrium (DSGE) model in different countries in order to check the power of generalization of this framework to study the tourism development. Also, we extend this model to obtain the long-term effects of tourism development with confidence intervals. The influence of tourism development on sustainable economic growth is proved by our results and show the indirect consequences between tourist activity and other industries produced through the external effects of investment and human capital and public sector. Our study confirms that the DSGE technique can be a generalized model for the analysis of tourism development and, especially, can improve previous precision results with the DSGE-VAR model, where vector autoregression (VAR) is introduced in the DSGE model. The simulation results reveal even more than when the productivity of the economy in general enhances, as the current tourist demand increases in greater proportion than more than the national tourism demand. For its part, the consumption of domestic tourism rises more than the consumption of inbound tourism if the productivity of the tourism production enhances, but non-tourism prices decrease at a slower rate and tourism investment needs a longer time to recover to what is established.

scholarly journals A NOTE ON AN EXTENSION OF A CLASS OF SOLUTIONS TO DYNAMIC PROGRAMMING PROBLEMS ARISING IN ECONOMIC GROWTH

2011 ◽  
Vol 16 (3) ◽  
pp. 472-476 ◽  
Author(s):  
Jürgen Antony ◽  
Alfred Maußner
Keyword(s):  
Economic Growth ◽  
Dynamic Programming ◽  
General Equilibrium ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Dsge Model ◽  
Savings Rate ◽  
Dynamics And Control ◽  
Dynamic Stochastic ◽  
And Control

This note extends the findings of Benhabib and Rusticchini [Journal of Economic Dynamics and Control 18, 807–813 (1994)], who provide a class of dynamic stochastic general equilibrium (DSGE) models whose solution is characterized by a constant savings rate. We show that this class of models may be interpreted as a standard–representative agent DSGE model with costly adjustment of capital.

scholarly journals Should the Dynamic Stochastic General Equilibrium (DSGE) Model be taught to Undergraduate Students of Economics?

PAPELES ◽  
2019 ◽  
Vol 10 (19) ◽  
Author(s):  
Álvaro Moreno Rivas
Keyword(s):  
General Equilibrium ◽  
Undergraduate Students ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Model ◽  
Equilibrium Models ◽  
General Equilibrium Models ◽  
Undergraduate Economics ◽  
Dynamic Stochastic ◽  
Advanced Teaching

In this article we present the consequences of introducing the advanced teaching of the DSGE (Dynamic Stochastic General Equilibrium) models to undergraduate economics programs. This monoculture leads to the deepening of the discipline insularity, to the disappearance of the paradigmatic plurality inside the economics departments and to the silencing of critical voices. This process obeys Gresham’s Law of ideas: bad models displace good ideas.

Monetary Policy Shocks and Effectiveness of Channels of Transmission in Nigeria: A Dynamic Stochastic General Equilibrium Approach

2019 ◽  
Vol 20 (2) ◽  
pp. 331-353 ◽  
Author(s):  
Akinlo Anthony Enisan ◽  
Apanisile Olumuyiwa Tolulope
Keyword(s):  
Monetary Policy ◽  
General Equilibrium ◽  
Dynamic Stochastic General Equilibrium ◽  
Monetary Policy Transmission ◽  
Monetary Policy Shocks ◽  
Transmission Channels ◽  
Policy Transmission ◽  
Policy Shocks ◽  
Dynamic Stochastic ◽  
Monetary Policy Shock

This study examines the effect of anticipated and unanticipated monetary policy shocks on the effectiveness of monetary policy transmission mechanism in Nigeria by estimating a sticky-price dynamic stochastic general equilibrium (DSGE) model using Bayesian estimation approach. Four major transmission channels (exchange rate, interest rate, credit and expectation) are considered due to the economic and financial conditions of Nigeria. The study employs quarterly data from 1986:1 to 2013:4 and data are sourced from World Development Indicator (online version). Results show that unanticipated monetary policy shock has short-run impact on monetary policy transmission channels, while anticipated monetary policy shock has long-run impact on the monetary policy transmission channels. The study, therefore, concluded that efforts should be directed at reducing the unanticipated monetary policy by announcing government policy at the beginning of the year so as to reduce people’s expectation.

scholarly journals Constructing a Small-Region DSGE Model

2013 ◽  
Vol 2013 ◽  
pp. 1-9
Author(s):  
Kenichi Tamegawa
Keyword(s):  
General Equilibrium ◽  
Interest Rates ◽  
Numerical Simulations ◽  
National Economy ◽  
Regional Economy ◽  
Small Region ◽  
Dynamic Stochastic General Equilibrium ◽  
Dsge Models ◽  
Dsge Model ◽  
Dynamic Stochastic

This paper constructs a tractable dynamic stochastic general equilibrium (DSGE) model of a regional economy that is considered small because it does not affect its national economy. To examine properties of our small-region DSGE model, we conduct several numerical simulations. Notably, fiscal expansion in our model is larger than that in standard DSGE models. This is because the increase in regional output does not raise interest rates, and this leads to the crowding-in effects of investment.

Interactive effects between monetary policy and fiscal policy based on dynamic stochastic general equilibrium model

2020 ◽  
pp. 1-12
Author(s):  
Ying Xie
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
General Equilibrium ◽  
Equilibrium Model ◽  
Control Policy ◽  
Dynamic Stochastic General Equilibrium ◽  
Economic Effects ◽  
Interactive Effects ◽  
Supply Side ◽  
Dynamic Stochastic

From the beginning to the end, monetary policy has focused too much on the control of the supply side. At present, the single supply-based monetary policy is ineffective. Therefore, it is urgent to change the current single direct supply-side regulation and control policy and replace it with a non-single and indirect control policy that combines supply and demand. Based on machine learning algorithms, this paper constructs a monetary policy analysis model based on dynamic stochastic general equilibrium methods to analyze the interactive effects of monetary policy and other policies. Moreover, this paper uses the dynamic stochastic general equilibrium model to simulate and analyze the economic effects of fiscal policy. In addition, this paper compares the economic effects of monetary policy and other policies and conducts verification and analysis through actual data. The obtained results show that the model constructed in this paper achieves the expected effect.

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