Dear Users,
I have a question related to Welfare evaluation. I am computing welfare as
W = U + beta*W(+1)
and I am solving the model with second order approximation. What I have noticed is that the theoretical mean of Welfare (stored in oo_.) is increasing in the variance of the shocks in the model. Is this due to precausionary savings or is there something else which is going on? (agents are risk-averse of course)
Thank you
Best
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Welfare and volatilty
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Welfare and volatilty
by gazzani.andrea » Mon Feb 09, 2015 10:37 am
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Re: Welfare and volatilty
by jpfeifer » Mon Feb 09, 2015 12:43 pm
Depends on your model. But precautionary savings may be one reason as a higher capital stock may lead to higher average capital.
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Re: Welfare and volatilty
by gazzani.andrea » Mon Feb 09, 2015 2:27 pm
Thanks for your reply.
I am studying Iacoviello and Neri (2010) "Housing Market Spillovers: Evidence from an Estimated DSGE Model".
This issue is a big deal to study optimal policy though..
I am studying Iacoviello and Neri (2010) "Housing Market Spillovers: Evidence from an Estimated DSGE Model".
This issue is a big deal to study optimal policy though..
- gazzani.andrea
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- Joined: Thu Sep 01, 2011 5:30 am
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