Uncertainty about welfare effects of consumption fluctuations

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Abstract

This paper proposes Bayesian estimates for welfare effects of consumption fluctuations and growth. Annual data from 82 developed and developing countries indicate a large degree of uncertainty as regards point estimates. Moreover, the comparison between the welfare gain from consumption stabilization and the welfare gain from growth yields inconclusive results for many developed and developing countries. These findings suggest the need for caution in drawing policy conclusions from point estimates.

Original languageEnglish
Pages (from-to)35-62
Number of pages28
JournalEuropean Economic Review
Volume59
DOIs
Publication statusPublished - 1 Apr 2013

Keywords

  • Bayesian inference
  • Business cycles
  • Growth
  • Welfare

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