Volatility risk and economic welfare

Volatility, Growth, and Welfare

This paper constructs an endogenous growth model driven by self-ful…lling expectation shocks to explain the stylized fact that the average growth rate of GDP is related negatively to volatility and positively to capacity utilization. The implied welfare gain from further stabilizing the U.S. economy is about a quarter of annual consumption, which is consistent in order of magnitude with estimat...

Economic Freedom and Economic Volatility

Theory suggests that economic freedom—measured by the Economic Freedom of the World Index (EFW) -may increase or decrease economic volatility. Similar to previous literature, we empirically test the relationship between economic freedom and economic volatility, but we differ from the literature in how we account for (1) changes in EFW, and (2) the nonlinear relationship between freedom and vola...

Globalization and economic volatility

Businesses and households face substantial idiosyncratic and aggregate economic risk. As a general principle, economic risk for businesses reflects the myriad of factors that impact the profitability of the business, while for individuals economic risk reflects the myriad of factors that impact the earnings and employment outcomes of household members. While aggregate risk gets most of the head...

Unemployment and Economic Welfare

David Andolfatto is a professor of economics at the the University of Waterloo and the University of Western Ontario. Paul Gomme is an economic advisor at the Federal Reserve Bank of Cleveland. Both authors are members of the Centre for Research on Economic Fluctuations and Employment in Montreal, Canada. They thank LutzAlexander Busch, Gordon Myers, and Ed Nosal for helpful comments and critic...

Welfare and excess volatility of exchange rates