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Equity Pricing New Keynesian Models with Nominal Rigidities and Investment

Author

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  • Rahul Nath
Abstract
This paper derives explicitly an equity pricing relationship in a simple New Keynesian model. This relationship is used to study the equity pricing implications of New Keynesian models. I ï¬ nd that New Keynesian models suffer from the same asset pricing shortcomings as more traditional RBC versions and that this can be attributed to the presence of nominal rigidities. I then add capital adjustment costs to study how the interaction of both investment adjustment costs and capital adjustment costs affect the results.

Suggested Citation

  • Rahul Nath, 2018. "Equity Pricing New Keynesian Models with Nominal Rigidities and Investment," Economics Series Working Papers 850, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:850
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    References listed on IDEAS

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    More about this item

    Keywords

    Asset Pricing; New Keynesian; Nominal Rigidities; Investment Adjustment Costs; Capital Adjustment Costs;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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