This paper explores the time series implications of introducing credit constraints into a production based asset pricing model. Simulations are performed choosing parameter values which generate reasonable values for aggregate fluctuations. These results show that mean reversion in simulated...

This paper explores the time series implications of introducing credit constraints into a production based asset pricing model. Simulations are performed choosing parameter values which generate reasonable values for aggregate fluctuations. These results show that mean reversion in simulated...

Economic models are almost exclusively static. The models describe equilibrium, but do not tell us the path taken to reach the equilibrium. By contrast, the model of asset pricing presented here is rarely in equilibrium; when equilibrium is reached, random forces perturb the price system away...