We develop a model which accounts for the observed equity premium and average risk free rate, without implying counterfactually high risk aversion. The model al

Real Business Cycle theory combines the remains of monetarism with the new classical macroeconomics, and has become one of the dominant approaches within contem

The recent financial crisis and the difficulty of using mainstream macroeconomic models to accurately monitor and assess systemic risk have stimulated new analy

Emerging markets business cycle models treat default risk as part of an exogenous interest rate on working capital, while sovereign default models treat income