2016-01: Infinite Horizon CCAPM with Stochastic Taxation and Monetary Policy


This paper derives the infnite horizon CCAPM with heterogeneous agents, stochastic dividend taxation and monetary policy. I find that under reasonable assumptions on assets' dividends and probability distributions of the future dividend taxes and consumption, the model implies the constant price/after-tax dividend ratios. I also obtain that the higher current and expected dividend tax rates imply lower current asset prices. Finally, contrary to popular belief, monetary policy is neutral, in the long run, with respect to the real equilibrium asset prices.

Publication date: 
April 11, 2016
Publication type: 
2016 Working Papers