Extreme Inflation and Time-Varying Expected Consumption Growth

• 成果类型: Article
• 署名作者: Dergunov, Ilya; Meinerding, Christoph; Schlag, Christian
• 署名单位: Australian National University; Deutsche Bundesbank; Goethe University Frankfurt
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4451
• 发表日期: 2023
• 页码: 2972-3002
• 关键词: long-run risk; inflation; recursive utility; Filtering; Disaster risk

摘要

In a parsimonious regime switching model, we find strong evidence that expected consumption growth varies over time. Adding inflation as a second variable, we uncover two states in which expected consumption growth is low, one with high and one with negative expected inflation. Embedded in a general equilibrium asset pricing model with learning, these dynamics replicate the observed time variation in stock return volatilities and stock-bond return correlations. They also provide an alternative derivation for a measure of time-varying disaster risk suggested by Watcher [Wachter J (2013) Can time-varying risk of rare disasters explain aggregate stock market volatility? J. Finance 68(3):987-1035]. implying that both the disaster and the long-run risk paradigm can be extended toward explaining movements in the stock-bond correlation.