Macroeconomic Theory: A Dynamic General Equilibrium Approach by Michael Wickens

Author:Michael Wickens [Wickens, Michael]
Language: eng
Format: epub, pdf
Publisher: Princeton University Press
Published: 2012-03-11T23:00:00+00:00

where Pt is the price of an asset at the start of period t and Xt+1 is its payoff at the start of period t + 1. The payoffs define the different assets. For example,

1. for a stock which pays a dividend of Dt+1 and has a resale value of Pt+1 at t + 1, we have Xt+1 = Pt+1 + Dt+1;

2. for a Treasury bill that pays one unit of the consumption good regardless of the state of nature next period, Xt+1 = 1, and the price is then Pt = 1/(1 + rft);

3. for a bond that has a constant coupon payment of C and can be sold for Pt+1 next period, Xt+1 = Pt+1 + C;

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