Replication data for: Rare Disasters, Asset Prices, and Welfare Costs
Principal Investigator(s): View help for Principal Investigator(s) Robert J. Barro
Version: View help for Version V1
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LICENSE.txt | text/plain | 14.6 KB | 10/12/2019 04:50:AM |
MacroCrisesSince1870_08_0614.xls | application/vnd.ms-excel | 341.5 KB | 10/12/2019 04:50:AM |
README_MacroCrisesSince1870.doc | application/msword | 56.5 KB | 10/12/2019 04:50:AM |
README_MacroCrisesSince1870.pdf | application/pdf | 6.8 KB | 10/12/2019 04:50:AM |
Project Citation:
Barro, Robert J. Replication data for: Rare Disasters, Asset Prices, and Welfare Costs. Nashville, TN: American Economic Association [publisher], 2009. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E113283V1
Project Description
Summary:
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A representative-consumer model with Epstein-Zin-Weil preferences and i.i.d.
shocks, including rare disasters, accords with observed equity premia and
risk-free rates if the coefficient of relative risk aversion equals 3-4. If the intertemporal
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)
Scope of Project
JEL Classification:
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E13 General Aggregative Models: Neoclassical
E21 Macroeconomics: Consumption; Saving; Wealth
E22 Investment; Capital; Intangible Capital; Capacity
E32 Business Fluctuations; Cycles
E13 General Aggregative Models: Neoclassical
E21 Macroeconomics: Consumption; Saving; Wealth
E22 Investment; Capital; Intangible Capital; Capacity
E32 Business Fluctuations; Cycles
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