Volatility, Growth, and Large Welfare Gains from Stabilization Policies PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download Volatility, Growth, and Large Welfare Gains from Stabilization Policies PDF full book. Access full book title Volatility, Growth, and Large Welfare Gains from Stabilization Policies by Pengfei Wang. Download full books in PDF and EPUB format.
Author: Pengfei Wang
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
"This paper proposes a simple endogenous-fluctuations growth model to show: (1) long-run growth and short-run fluctuations can be intimately linked; in particular, the rate of long run growth can be negatively affected by volatilities; (2) imperfect competition can cause endogenous fluctuations, and it reduces not only the level of output but also its mean growth rate by amplifying the volatility of the economy; and (3) the welfare gain of stabilization policy can be enormous (e.g., as high as 25% of annual consumption when calibrated to the U.S. data) because policies designed to reduce sunspots-driven fluctuations can generate permanently higher rates of growth"--Federal Reserve Bank of St. Louis web site.
Author: Pengfei Wang
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
"This paper proposes a simple endogenous-fluctuations growth model to show: (1) long-run growth and short-run fluctuations can be intimately linked; in particular, the rate of long run growth can be negatively affected by volatilities; (2) imperfect competition can cause endogenous fluctuations, and it reduces not only the level of output but also its mean growth rate by amplifying the volatility of the economy; and (3) the welfare gain of stabilization policy can be enormous (e.g., as high as 25% of annual consumption when calibrated to the U.S. data) because policies designed to reduce sunspots-driven fluctuations can generate permanently higher rates of growth"--Federal Reserve Bank of St. Louis web site.
Author: Peng-fei Wang
Publisher:
ISBN:
Category : Economic policy
Languages : en
Pages : 30
Get Book Here
Book Description
Author: Steven P. Cassou
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
Get Book Here
Book Description
This paper investigates a variety of objectives that are commonly used to motivate government fiscal action. These include, welfare maximization, stabilization and growth maximization. The policies are compared on the basis of their implications for welfare, volatility and growth. We show that stabilization policies can produce welfare levels that are nearly identical to those of welfare maximization policies and that both welfare maximization and stabilization policies yield large welfare gains and modest growth losses relative to growth maximization policies. We also show that there are side issues to stabilization polices. In particular: (1) It is not possible to stabilize all macroeconomic variables simultaneously, even when the number of policy instruments is equal to the number of shocks; (2) stabilizing a particular variable requires increased volatility of some other variable; (3) stabilization requires some flexibility regarding the government's budget constraint; and, (4) stabilization requires the government to respond in a precise and immediate way to exogenous shocks which hit the economy.
Author: Steven P. Cassou
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This paper investigates a variety of objectives that are commonly used to motivate government fiscal action. These include welfare maximization, stabilization and growth maximization. The policies are compared on the basis of their implications for welfare, volatility and growth. We show that stabilization policies can produce welfare levels that are nearly identical to those of welfare maximization policies and that both welfare maximization and stabilization policies yield large welfare gains and modest growth losses relative to growth maximization policies. We also show that there are side issues to stabilization polices. In particular: 1) It is not possible to stabilize all macroeconomic variables simultaneously, even when the number of policy instruments is equal to the number of shocks; 2) stabilizing a particular variable requires increased volatility of some other variable; 3) stabilization requires some flexibility regarding the government's budget constraint; and 4) stabilization requires the government to respond in a precise and immediate way to exogenous shocks which hit the economy.
Author: Pengfei Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
Get Book Here
Book Description
This paper constructs an endogenous growth model driven by self-fulfilling expectation shocks to explain the stylized fact that the average growth rate of GDP is related negatively to volatility and positively to capacity utilization. The implied welfare gain from further stabilizing the U.S. economy is about a quarter of annual consumption, which is consistent in order of magnitude with estimates based on the empirical studies of Ramey and Ramey (1995) and Alvarez and Jermann (2004). Hence, policies designed to reduce fluctuations can generate large welfare gains because smaller fluctuations are associated with permanently higher rates of growth.
Author: Jean-Paul Chavas
Publisher: University of Chicago Press
ISBN: 022612892X
Category : Business & Economics
Languages : en
Pages : 394
Get Book Here
Book Description
"The conference was organized by the three editors of this book and took place on August 15-16, 2012 in Seattle."--Preface.
Author: Stephen J. Turnovsky
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
Stochastic models with economy-wide shocks imply that the welfare costs of aggregate volatility are negligible. In reality, idiosyncratic shocks are important, and empirical evidence suggests that their volatility is several times that of aggregate shocks. This paper introduces both types of shocks. We find that if in the process of eliminating aggregate risk the policymaker can reduce idiosyncratic risk by a modest amount, in accordance with available empirical evidence, the welfare gains from aggregate stabilization can become significant. The introduction of idiosyncratic risk has important implications for asset pricing, and, in particular, may reduce the risk-free rate substantially, through the precautionary savings motive. Many of our results are sensitive both to the degree of risk aversion, and to the flexibility of labor supply. The paper highlights the tradeoffs involved in analyzing the effects of risk on growth and welfare, on the one hand, and on asset pricing, on the other, clarifying the need to examine these issues within a unified stochastic general equilibrium framework.
Author: Guillermo E. Perry
Publisher: World Bank Publications
ISBN: 0821370855
Category : Business & Economics
Languages : en
Pages : 354
Get Book Here
Book Description
Fiscal policy in Latin America has been guided primarily by short-term liquidity targets whose observance was taken as the main exponent of fiscal prudence, with attention focused almost exclusively on the levels of public debt and the cash deficit. Very little attention was paid to the effects of fiscal policy on growth and on macroeconomic volatility over the cycle. Important issues such as the composition of public expenditures (and its effects on growth), the ability of fiscal policy to stabilize cyclical fluctuations, and the currency composition of public debt were largely neglected. As a result, fiscal policy has often amplified cyclical volatility and dampened growth. 'Fiscal Policy, Stabilization, and Growth' explores the conduct of fiscal policy in Latin America and its consequences for macroeconomic stability and long-term growth. In particular, the book highlights the procyclical and anti-investment biases embedded in the region's fiscal policies, explores their causes and macroeconomic consequences, and asesses their possible solutions.
Author: Ms.Valerie Cerra
Publisher: International Monetary Fund
ISBN: 1513536990
Category : Business & Economics
Languages : en
Pages : 50
Get Book Here
Book Description
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
Author: International Monetary Fund
Publisher: International Monetary Fund
ISBN: 1498344658
Category : Business & Economics
Languages : en
Pages : 257
Get Book Here
Book Description
This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
