Arbeitspapier
Welfare cost of business cycles in economies with individual consumption risk
The welfare cost of random consumption fluctuations is known from De Santis (2007) to be increasing in the level of individual consumption risk in the economy. It is also known from Barillas et al. (2009) to increase if agents in the economy care about robustness to model misspecification. In this paper, we combine these two effects and calculate the cost of business cycles in an economy with consumers who face individual consumption risk and who fear model misspecification. We find that individual risk has a greater impact on the cost of business cycles if agents already have a preference for robustness. Correspondingly, we find that endowing agents with concerns about a preference for robustness is more costly if there is already individual risk in the economy. The combined effect exceeds the sum of the individual effects.
- ISBN
-
978-952-462-812-9
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Finland Research Discussion Papers ; No. 25/2012
- Klassifikation
-
Wirtschaft
Business Fluctuations; Cycles
Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
Criteria for Decision-Making under Risk and Uncertainty
- Thema
-
Cost of Business Cycles
Idiosyncratic Risk
Model Uncertainty
Robustness
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Ellison, Martin
Sargent, Thomas J.
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Finland
- (wo)
-
Helsinki
- (wann)
-
2012
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Ellison, Martin
- Sargent, Thomas J.
- Bank of Finland
Entstanden
- 2012
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