Volatility, growth, and large welfare gains from stabilization policies
By: by Pengfei Wang and Yi Wen
Contributors: Wen, Yi; Federal Reserve Bank of St. Louis
Series: Working paper -- 2006-032A; Working paper (Federal Reserve Bank of St. Louis : Online) -- 2006-032A.
Publisher: Federal Reserve Bank of St. Louis
Published: 2006
Place of publication: St. Louis, Mo.]
Language: eng
Format: [electronic resource] /
Description: "This paper proposes a simple endogenous-fluctuations growth model to show: (1) long-run growth and short-run fluctuations can be intimately linked; in particular, the rate of long run growth can be negatively affected by volatilities; (2) imperfect competition can cause endogenous fluctuations, and it reduces not only the level of output but also its mean growth rate by amplifying the volatility of the economy; and (3) the welfare gain of stabilization policy can be enormous (e.g., as high as 25% of annual consumption when calibrated to the U.S.  data) because policies designed to reduce sunspots-driven fluctuations can generate permanently higher rates of growth"--Federal Reserve Bank of St. Louis web site.
Notes: Title from PDF file as viewed on 6/12/2006.

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