Production and the Real Rate of Interest: A Sample Path Equilibrium

25 Pages Posted: 7 Jan 2002

See all articles by David Feldman

David Feldman

Banking and Finance, UNSW Business School, UNSW Sydney; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: September 9, 2001

Abstract

This paper examines a multiperiod production economy where investors do not observe the realizations of productivity factors or security expected returns. Unlike previous work, which expresses the equilibrium conditions as functions of unobservable (to both real-world investors and empiricists) moments of the distributions of returns, we express the equilibrium real rate as a function of the observable sample paths of realizations of returns. We provide a framework for empirically testing this and other asset pricing models without outside-the-model econometric assumptions needed for producing the unobservable moments of returns. We construct versions of the restrictions for any time interval between observations.

Keywords: incomplete information, equilibrium interest rates, asset pricing, sample path equilibrium

JEL Classification: E43, G12, D92, D80, D51

Suggested Citation

Feldman, David, Production and the Real Rate of Interest: A Sample Path Equilibrium (September 9, 2001). Available at SSRN: https://ssrn.com/abstract=291022 or http://dx.doi.org/10.2139/ssrn.291022

David Feldman (Contact Author)

Banking and Finance, UNSW Business School, UNSW Sydney ( email )

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