Rare Disasters, Asset Prices, and Welfare Costs

• 成果类型: Article
• 署名作者: Barro, Robert J.
• 署名单位: Harvard University
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.99.1.243
• 发表日期: 2009
• 页码: 243-264
• 关键词: intertemporal substitution; business cycles; risk-aversion; random-walk; consumption; premium; utility; GROWTH

摘要

A representative-consumer model with Epstein-Zin-Weil preferences and i.i.d. shocks, including rare disasters, accords with observed equity premia rates if the and coefficient of relative risk aversion equals 3-4. If the inter-risk-free temporal elasticity of substitution exceeds one, an increase in uncertainty lowers the price-dividend ratio for equity, and a rise in the expected growth rate raises this ratio. Calibrations indicate that society would willingly reduce GDP by around 20 percent each year to eliminate rare disasters. The welfare cost from usual economic fluctuations is much smaller, though still important, corresponding to lowering GDP by about 1.5 percent each Year. (JEL E13, E21, E22, E32)