Asset-return implications of nominal price and wage rigidities are analyzed in general equilibrium. Nominal rigidities, combined with permanent productivity shocks, increase expected excess returns on production claims. This is mainly explained by consumption dynamics driven by rigidity-induced...

The examination of the intertemporal distribution of US productivity risk suggests that the conditional mean of productivity growth is an important determinant of macro quantities and asset prices. After establishing this empirical link, I rationalize it in a production economy featuring...

We study a production economy with regime switching in the conditional mean and volatility of productivity growth. The representative agent has generalized disappointment aversion (GDA) preferences. We show that volatility risk in productivity growth carries a positive and sizable risk premium...