This study models a representative agent with generalized disappointment aversion preferences in an endowment economy. This model addresses the average upward slope in U.S. real bond yields, equity premium puzzle, and equity volatility puzzle. We integrate a two-state Markov switching process...

This paper studies how unemployment benefits affect aggregate outcomes through general equilibrium effects. First, we document that lower unemployment benefits tend to reduce the real interest rate in a structural vector autoregression with narrative sign restrictions. Young workers experience...

This paper attempts to resolve several intriguing observations. First, there is an unusually high correlation between the inflation-protected and nominal interest rates when the changes in the nominal interest rates are predominantly driven by inflationary pressure. This observation appears to...

Updated estimates of real equilibrium interest rates in the euro area, derived from eight prominent methodologies proposed in the academic literature, deliver a wide range of estimates, partly because they vary in time horizon and economic complexity. By the end of 2024, shorter-term equilibrium...

We set up a life cycle model with real interest rate risk to demonstrate that real interest rates have implications for optimal household consumption and investments. Lower interest rates lead to higher optimal stock investments and lower consumption. Ignoring the time-varying nature of real...

We argue that a long-term low real rate environment can increase labor income inequality, amplify the emergence of the working rich, and reduce intergenerational mobility. We provide a simple model with endogenous human capital accumulation and credit constraints to demonstrate this causal link....