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Direct preferences for wealth, the risk premium puzzle, growth, and policy effectiveness

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  • Gong, Liutang
  • Zou, Heng-fu

Abstract

In this paper, we consider social status, the spirit of capitalism, fiscal policies, and asset pricing in a stochastic model of growth. With specific assumptions on the production technology, preferences, and stochastic shocks, we derive the explicit solutions to the growth rates of consumption and savings and equilibrium returns on all assets. We further demonstrate how fiscal policies, the spirit of capitalism, and stochastic shocks affect growth, asset pricing, and welfare.
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  • Gong, Liutang & Zou, Heng-fu, 2002. "Direct preferences for wealth, the risk premium puzzle, growth, and policy effectiveness," Journal of Economic Dynamics and Control, Elsevier, vol. 26(2), pages 247-270, February.
    • Handle: RePEc:eee:dyncon:v:26:y:2002:i:2:p:247-270
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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • H0 - Public Economics - - General
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General

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