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dc.contributor.authorReis, Ricardoen_US
dc.date.accessioned2009-01-29T16:07:18Z-
dc.date.available2009-01-29T16:07:18Z-
dc.date.issued2005en_US
dc.identifier.urihttp://hdl.handle.net/10419/23460-
dc.description.abstractWhile this is typically ignored, the properties of the stochastic process followed by aggregate consumption affect the estimates of the costs of fluctuations. This paper pursues two approaches to modelling aggregate consumption dynamics and to measuring how much society dislikes fluctuations, one statistical and one economic. The statistical approach estimates the properties of consumption and calculates the cost of having consumption fluctuating around its mean growth. The paper finds that the persistence of consumption is a crucial determinant of these 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.en_US
dc.language.isoengen_US
dc.publisheren_US
dc.relation.ispartofseriesDiscussion papers in economics / Princeton University, Woodrow Wilson School of Public and International Affairs 233en_US
dc.subject.jelE21en_US
dc.subject.jelE32en_US
dc.subject.jelE60en_US
dc.subject.ddc330en_US
dc.subject.keywordCosts of fluctuations ; Models of aggregate consumption ; Consumption persistenceen_US
dc.subject.stwGesamtwirtschaftlicher Konsumen_US
dc.subject.stwKonsumtheorieen_US
dc.subject.stwZeitreihenanalyseen_US
dc.subject.stwKonjunkturen_US
dc.subject.stwSoziale Kostenen_US
dc.titleThe time-series properties of aggregate consumption: implications for the costs of fluctuationsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn50401787Xen_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Discussion Papers in Economics, Woodrow Wilson School of Public and International Affairs (WWS), Princeton University

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