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Recursive Preference, Mood Fluctuation And Welfare Cost Of Reduced Growth

Author

Listed:
  • ZHIYONG DONG

    (School of Economics, Peking University, Beijing, 100871, China)

  • QINGYANG GU

    (Economics Division, School of Social Sciences and Humanities, Nanyang Technological University, Singapore 639798, Singapore)

  • XIAOMING ZHU

    (Toulouse School of Economics, University de Toulouse, France)

Abstract

This paper studies the mood fluctuation of a typical consumer with recursive preference and the welfare cost of reduced growth and business cycle. We estimate the welfare cost using discrete recursive function as well as conduct simulation in order to compare our results with other existing research findings. Our findings are in line with traditional literature whereby the welfare cost of reduced growth is larger than that of business cycle; but our results show that these past measures understate the welfare cost of reduced growth and business cycle.

Suggested Citation

  • Zhiyong Dong & Qingyang Gu & Xiaoming Zhu, 2009. "Recursive Preference, Mood Fluctuation And Welfare Cost Of Reduced Growth," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 54(02), pages 263-281.
    • Handle: RePEc:wsi:serxxx:v:54:y:2009:i:02:n:s0217590809003331
    DOI: 10.1142/S0217590809003331
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    References listed on IDEAS

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    1. Gadi Barlevy, 2004. "The Cost of Business Cycles and the Benefits of Stabilization: A Survey," NBER Working Papers 10926, National Bureau of Economic Research, Inc.
    2. David I. Laibson, 1996. "Hyperbolic Discount Functions, Undersaving, and Savings Policy," NBER Working Papers 5635, National Bureau of Economic Research, Inc.
    3. Lynne Evans & Turalay Kenc, 2001. "Growth and Welfare Effects of Monetary Volatility," Manchester School, University of Manchester, vol. 69(5), pages 509-533, October.
    4. Evans, Lynne & Kenc, Turalay, 2001. "Growth and Welfare Effects of Monetary Volatility," Manchester School, University of Manchester, vol. 69(5), pages 509-533, Special I.
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