Volatility, growth, and large welfare gains from stabilization policies
by Pengfei Wang
"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.
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Volatility, growth, and large welfare gains from stabilization policies
2006, Federal Reserve Bank of St. Louis
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in English
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Title from PDF file as viewed on 6/12/2006.
Includes bibliographical references.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
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