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2 edition of welfare cost of stuctural distortions and stochastic shocks found in the catalog.

welfare cost of stuctural distortions and stochastic shocks

Paul A. D. Cavelaars

welfare cost of stuctural distortions and stochastic shocks

by Paul A. D. Cavelaars

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  • 25 Currently reading

Published by De Nederlandsche Bank in Amsterdam .
Written in English


Edition Notes

Includes bibliographical references.

StatementP.A.D. Cavelaars.
SeriesDNB staff reports -- no.84
ContributionsNederlandsche Bank (Amsterdam, Netherlands)
The Physical Object
Pagination28p. :
Number of Pages28
ID Numbers
Open LibraryOL18647857M

The Output and Welfare E ects of Government Spending Shocks over the Business Cycle* Eric Sims University of Notre Dame & NBER Jonathan Wol Miami University Janu Abstract This paper studies the output and welfare e ects of shocks to government spending in . 0 and in which shocks are not shut down; an economy B that starts with initial condition k 0 and without shocks. Those welfare measures are denoted WA(k 0) and WB(k 0). The conditional welfare cost of fluctuations C(k 0) is then defined as the percentage increase in consumption, uniform across all dates and values of the shocks, required to leave.

US Welfare Spending. Total US government estimated spending for is $ trillion, including a budgeted $ trillion federal, a “guesstimated” $ trillion . higher welfare costs: in this case, the Great In⁄ation generates relative price distortions that reduce the level of aggregate output by 10 percent or more. Levin and Lopez-Salido (), and Levin et al. () in using Lagrangian methods to obtain the –rst-.

specification of the stochastic shocks and a determination of output and employment. Section introduces the objective function that is designed to minimize the expected value of labor market distortions. In our model, as in Gray () and Fischer (a; c), the need for wage indexation and monetary policy arises from the existence ofCited by: 8. The seminal article on the welfare cost of inflation is Martin J. Bailey’s article “The Welfare Cost of Inflationary Finance.” 5 He examined the cost of per-fectly anticipated inflation to holders of real money balances in a stationary economy and illustrated those costs using data from several famous hyperinflations in various File Size: 1MB.


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Welfare cost of stuctural distortions and stochastic shocks by Paul A. D. Cavelaars Download PDF EPUB FB2

The first part of the paper shows that the welfare cost of structural distortions is increased by the inability of fisical policymakers to commit, whereas the welfare cost of stochastic shocks is.

BibTeX @MISC{Cavelaarsthewelfare, author = {P. Cavelaars and De Nederlandsche Bank and De Nederl and Sche Bank Nv and Bert Groothoff (secretary and Maria Demertzis and Klaas Knot and Peter Koeze and Marga Peeters and Bram Scholten and De Nederlandsche and Bank Nv and Paul Cavelaars and De Nederl and Sche Bank}, title = {-The Welfare Cost of Structural Distortions and Stochastic Shocks.

Models that neglect the inability of fiscal policymakers to commit will tend to underestimate the welfare cost of structural distortions. Due to international spillovers, stochastic shocks maybe relativelycostlyin welfare terms, despite the contribution of policysurprises to finance such ment, spillovers, welfare : P.A.D.

Cavelaars. Downloadable. This paper provides estimates of the welfare cost of volatility attributable to monetary and fiscal policy shocks. It uses a continuous-time stochastic dynamic general equilibrium model based on a recursive utility function that disentangles risk aversion from intertemporal substitution.

We find that monetary and fiscal policy shocks may lead to opposite welfare effects: negative. The first part of the paper shows that the welfare cost of structural distortions is increased by the inability of fisical policymakers to commit, whereas the welfare cost of stochastic shocks is increased by international spillovers.

The second part of the paper studies the welfare consequences of. of the economy with shocks), one will get an unconditional measure of the welfare cost of fluctuations C = E[C(k0)]. 4ASmallSmallCost In our economy, the unconditional variance of consumption is 1 1−α2 σ 2 ε and the utility is logarithmic, so that the welfare cost can be measured as CSS = 1 2 1 1−α2 σ 2 ε, if one adapts the Lucas.

The Welfare Cost of Structural Distortions and Stochastic Shocks P.A.D. Cavelaars On the Strenght of the US Dollar: Can it be Explained by Output Growth. Peter Vlaar PPP and the Balassa Samuelson Effect: The Role of the DistributionSector Ronald MacDonald and Luca Ricci External Wealth, the Trade Balance, and the Real Exchange Rate.

Our estimate of the welfare cost of inflation for a 10% inflation rate lies in the range of –% of gross domestic product (GDP) and averages %. Calibrated to United States postwar data, the welfare cost of the monetary cycle is calculated to be small (below % of GDP) compared to the welfare cost of the inflation tax (around % of GDP).

The main reason for the minute welfare cost of the monetary cycle is its low amplitude in –Cited by: 9. Stabilization Policy and the Costs of Dollarization inflation shocks.

We estimate the stochastic processes followed by these three shocks using data from the Mexican economy. The estimated processes serve as the driving force of business cycles in Section 6 evaluates the welfare costs of Mexican business cycles under a number.

The Welfare Costs of Market Restrictions David Colander,* Sieuwerd Gaastra,{ and Casey Rothschild{In most introductory and intermediate microeconomics textbooks, the measurable welfare effects of price controls, quantitative restrictions, and market restrictions.

The marginal welfare cost of capital income taxes is now the ratio of the values of two securities. The numerator represents the value of a security that is a claim to the differences in the consumption streams (consumption distortions) due to the marginal increase in the capital income tax : Marika Santoro, Chao Wei.

On the Viability of Conditional Assistance Programs and unobservable stochastic production shocks. No matter how the would add little to enhance our understanding of the viability of conditional assistance programs.

- 6 - The paper provides three basic insights. The. Models that neglect the inability of fiscal policymakers to commit will tend to underestimate the welfare cost of structural distortions. Due to international spillovers, stochastic shocks may be relatively costly in welfare terms, despite the contribution of policy surprises to finance such : P.A.D.

Cavelaars. in competitive markets, further distortions appear. Appropriate taxa-tion schemes can restore optimality if they preserve entry incentives. Quantitatively, the welfare costs of each distortion by itself amounts to 2 to 5 percent of consumption. But their overall cost when jointly present is greatly magnified, and generates up to a 25 percent wel-File Size: KB.

Models that neglect the inability of fiscal policymakers to commit will tend to underestimate the welfare cost of structural distortions. Due to international spillovers, stochastic shocks may be relatively costly in welfare terms, despite the contribution of policy surprises to finance such : P.A.D.

Cavelaars. Welfare Cost of In ation: A Stochastic General Equilibrium Analysis Sel Dibooglu University of Missouri - St. Louis Turalay Kenc Imperial College London This version: September Abstract There is a large and growing literature on the welfare cost of in ation.

How-ever, work in this area tend to nd moderate estimates of welfare gains. In this. Welfare Cost of In°ation in a Stochastic Balanced Growth Model This version: November Abstract There is a large and growing literature on the welfare cost of in°ation.

How-ever, work in this area tend to flnd moderate estimates of welfare gains. In this paper we reexamine welfare costs of in°ation within a stochastic general equilib-Cited by: 7. Implications for Welfare Analysis of Structural Parameter Estimation Bias: An Example of a Simple RBC Model key structural parameters to welfare cost estimation.

1By using a monetary model, Lagos and Wright () A stochastic process which propagates a shock over time (i.e. AR(1) process in growth rates) will introduce a high cost. The cost of adjustment to green growth policies: lessons from trade adjustment costs (English) Abstract.

Green growth policies confront firms and workers with adjustments that may create welfare costs for different segments of the population and cause reductions in near-term actual versus potential gross domestic product. hedge against shocks to the budget allows policy makers to minimize variations in tax rates and thus the welfare losses of tax distortions.

But, the insurance that the debt structure can offer is not only valuable for tax smoothing; it helps achieve other important objectives of fiscal by: Dynamic stochastic general equilibrium modeling (abbreviated as DSGE, or DGE, or sometimes SDGE) is a method in macroeconomics that attempts to explain economic phenomena, such as economic growth and business cycles, and the effects of economic policy, through econometric models based on applied general equilibrium theory and microeconomic principles.Average output losses due to short-run sectoral shocks are an order of magnitude larger than the welfare cost of business cycles calculated by Lucas1().

Nonlinearities can also cause shocks to critical sectors to have disproportionate macroeconomic effects, almost tripling the estimated impact of the s oil shocks on world aggregate output.