Foreign Exchange Risk Premium and Equity Premium in a Stochastic Growth Model

摘要

Turnovsky(2000)explained the foreign exchange risk premium and equity premium under the conditions of capital perfect flow and existence of traded goods. This study is able to explain the foreign exchange risk premium and equity premium under the conditions of capital imperfect flow and existence of traded and non-traded goods by using continuous-time stochastic dynamic optimization methods. It is found out that relative price of non-traded goods to traded goods plays an important role in explaining the foreign exchange risk premium and equity premium.