THE TIME-SERIES PROPERTIES OF AGGREGATE CONSUMPTION: IMPLICATIONS FOR THE COSTS OF FLUCTUATIONS

• 成果类型: Article
• 署名作者: Reis, Ricardo
• 署名单位: Columbia University
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1162/JEEA.2009.7.4.722
• 发表日期: 2009
• 页码: 722-753
• 关键词: business cycles; welfare cost; unit-root; RISK; GROWTH; hypothesis; utility; return; tests

摘要

The properties of the stochastic process followed by aggregate consumption affect the estimates of the costs of fluctuations. This paper pursues two approaches to modeling consumption dynamics and measuring how much society dislikes fluctuations, one statistical and one economic. The statistical approach estimates the properties of consumption and calculates the costs of having consumption fluctuating around its mean growth. The paper finds that persistence is a crucial determinant of the costs and that the high persistence in the data severely distorts conventional measures. It shows how to compute valid estimates and confidence intervals. The economic approach uses a calibrated model of optimal consumption and measures the costs of eliminating income shocks. This uncovers a further cost of uncertainty, through its impact on precautionary savings and investment. The two approaches lead to costs of fluctuations that are higher than the common wisdom, between 0.5% and 5% of per capita consumption. (JEL: E32, E21, E60)