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Risky Business Cycles / Susanto Basu, Giacomo Candian, Ryan Chahrour, Rosen Valchev.
- Format:
- Book
- Author/Creator:
- Basu, Susanto.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28693.
- NBER working paper series no. w28693
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- We identify a shock that explains the bulk of fluctuations in equity risk premia, and show that the shock also explains a large fraction of the business-cycle comovements of output, consumption, employment, and investment. Recessions induced by the shock are associated with reallocation away from full-time labor positions, and towards part-time and flexible contract workers. We develop a novel real model with labor market frictions and fluctuations in risk appetite, where a "flight-to-safety" reallocation from riskier to safer factors of production precipitate a recession that can explain the data, since the safer factors offer lower marginal products in equilibrium.
- Notes:
- Print version record
- April 2021.
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