1 option
Risk Premium Shocks Can Create Inefficient Recessions / Sebastian Di Tella, Robert E. Hall.
- Format:
- Book
- Author/Creator:
- Di Tella, Sebastian.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w26721.
- NBER working paper series no. w26721
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- We develop an equilibrium theory of business cycles driven by spikes in risk premiums that depress business demand for capital and labor. Aggregate shocks increase firms' uninsurable idiosyncratic risk and raise risk premiums. We show that risk shocks can create quantitatively realistic recessions, with contractions in employment, consumption, and investment. Business cycles are inefficient--output and employment fall too much during recessions, compared to the constrained-efficient allocation, and consumption should rise. Optimal policy involves stimulating employment and consumption during recessions.
- Notes:
- Print version record
- January 2020.
The Penn Libraries is committed to describing library materials using current, accurate, and responsible language. If you discover outdated or inaccurate language, please fill out this feedback form to report it and suggest alternative language.