Equity Premium and Monetary Policy in a Model with Limited Asset Market Participation
In a model with Ricardian and non-Ricardian households we show that monetary policy shocks cause endogenous redistribution of in- come from non-Ricardians to Ricardians whose consumption comoves tighther with asset returns giving rise to large equity premia.
Area: Monetary Policy and Central Banking
Keywords: Limited Participation, Monetary Policy, DSGE, Equity Premium
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