One view of the equity premium puzzle is that in the standard asset-pricing model with time-separable preferences, the volatility of the stochastic discount factor, for plausible values of risk aversion, is too low to be consistent with consumption and asset return data. We adopt this...

The financial crisis that erupted in 2007 triggered the deepest global recession since the 1930s. In many advanced economies, governments attempted to counter the recession by sizable fiscal stimulus measure. Those measures, and the fall in tax revenues due to the recession, frequently lead to...