Risk Aversion And Power Law Distribution Of Macroeconomic Disasters PDF Download
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Author | : Michal Brzezinski |
Publisher | : |
Total Pages | : 9 |
Release | : 2014 |
Genre | : |
ISBN | : |
Download Risk Aversion and Power-Law Distribution of Macroeconomic Disasters Book in PDF, ePub and Kindle
The coefficient of relative risk aversion (CRRA) is notoriously difficult to estimate. Recently, Barro and Jin (On the size distribution of macroeconomic disasters, Econometrica 2011; 79(3): 434-455) have come up with a new estimation approach that fits a power-law model to the tail of distribution of macroeconomic disasters. We show that their results can be successfully replicated using a more refined power-law fitting methodology and a more comprehensive data set.
Author | : Robert J. Barro |
Publisher | : |
Total Pages | : 39 |
Release | : 2009 |
Genre | : Disasters |
ISBN | : |
Download On the size distribution of macroeconomic disasters Book in PDF, ePub and Kindle
In the rare-disasters setting, a key determinant of the equity premium is the size distribution of macroeconomic disasters, gauged by proportionate declines in per capita consumption or GDP. The long-term national-accounts data for up to 36 countries provide a large sample of disaster events of magnitude 10% or more. For this sample, a power-law density provides a good fit to the distribution of the ratio of normal to disaster consumption or GDP. The key parameter of the size distribution is the upper-tail exponent, alpha, estimated to be near 5, with a 95% confidence interval between 3-1/2 and 7. The equity premium involves a race between alpha and the coefficient of relative risk aversion, gamma. A higher alpha signifies a thinner tail and, therefore, a lower equity premium, whereas a higher gamma implies a higher equity premium. The equity premium is finite if (alpha-1>gamma). To accord with an observed average unlevered equity premium of around 5%, we get a point estimate for gamma close to 3, with a 95% confidence interval of roughly 2 to 4.
Author | : Robert J. Barro |
Publisher | : |
Total Pages | : 39 |
Release | : 2009 |
Genre | : Disasters |
ISBN | : |
Download On the Size Distribution of Macroeconomic Disasters Book in PDF, ePub and Kindle
In the rare-disasters setting, a key determinant of the equity premium is the size distribution of macroeconomic disasters, gauged by proportionate declines in per capita consumption or GDP. The long-term national-accounts data for up to 36 countries provide a large sample of disaster events of magnitude 10% or more. For this sample, a power-law density provides a good fit to the distribution of the ratio of normal to disaster consumption or GDP. The key parameter of the size distribution is the upper-tail exponent, alpha, estimated to be near 5, with a 95% confidence interval between 3-1/2 and 7. The equity premium involves a race between alpha and the coefficient of relative risk aversion, gamma. A higher alpha signifies a thinner tail and, therefore, a lower equity premium, whereas a higher gamma implies a higher equity premium. The equity premium is finite if (alpha-1>gamma). To accord with an observed average unlevered equity premium of around 5%, we get a point estimate for gamma close to 3, with a 95% confidence interval of roughly 2 to 4.
Author | : Stefan Hochrainer |
Publisher | : Springer Science & Business Media |
Total Pages | : 213 |
Release | : 2007-12-14 |
Genre | : Business & Economics |
ISBN | : 3835094416 |
Download Macroeconomic Risk Management Against Natural Disasters Book in PDF, ePub and Kindle
Stefan Hochrainer develops a catastrophe risk management model. It illustrates which trade-offs and choices a country must make in managing economic risks due to natural disasters. Budgetary resources are allocated to pre-disaster risk management strategies to reduce the probability of financing gaps. The framework and model approach allows cross country comparisons as well as the assessment of financial vulnerability, macroeconomic risk, and risk management strategies. Three case studies demonstrate its flexibility and coherent approach.
Author | : John H. Cochrane |
Publisher | : Now Publishers Inc |
Total Pages | : 117 |
Release | : 2005 |
Genre | : Business & Economics |
ISBN | : 1933019158 |
Download Financial Markets and the Real Economy Book in PDF, ePub and Kindle
Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Author | : Damien Challet |
Publisher | : OUP Oxford |
Total Pages | : 364 |
Release | : 2004-11-04 |
Genre | : Science |
ISBN | : 0191546526 |
Download Minority Games Book in PDF, ePub and Kindle
The Minority Game is a physicist's attempt to explain market behaviour by the interaction between traders. With a minimal set of ingredients and drastic assumptions, this model reproduces market ecology among different types of traders. Its emphasis is on speculative trading and information flow. The book first describes the philosophy lying behind the conception of the Minority Game in 1997, and includes in particular a discussion about the El Farol bar problem. It then reviews the main steps in later developments, including both the theory and its applications to market phenomena. 'Minority Games' gives a colourful and stylized, but also realistic picture of how financial markets operate.
Author | : Charlotte Benson |
Publisher | : World Bank Publications |
Total Pages | : 136 |
Release | : 2004 |
Genre | : |
ISBN | : 9780821356852 |
Download Understanding the economic and financial impacts of natural disasters Book in PDF, ePub and Kindle
Author | : World Bank |
Publisher | : World Bank Publications |
Total Pages | : 280 |
Release | : 2010-11-10 |
Genre | : Social Science |
ISBN | : 0821381415 |
Download Natural Hazards, UnNatural Disasters Book in PDF, ePub and Kindle
This book examines how to ensure that the preventive measures are worthwhile and effective, and how people can make decisions individually and collectively at different levels of government.
Author | : Laurent Ferrara |
Publisher | : Springer |
Total Pages | : 300 |
Release | : 2018-06-13 |
Genre | : Business & Economics |
ISBN | : 3319790757 |
Download International Macroeconomics in the Wake of the Global Financial Crisis Book in PDF, ePub and Kindle
This book collects selected articles addressing several currently debated issues in the field of international macroeconomics. They focus on the role of the central banks in the debate on how to come to terms with the long-term decline in productivity growth, insufficient aggregate demand, high economic uncertainty and growing inequalities following the global financial crisis. Central banks are of considerable importance in this debate since understanding the sluggishness of the recovery process as well as its implications for the natural interest rate are key to assessing output gaps and the monetary policy stance. The authors argue that a more dynamic domestic and external aggregate demand helps to raise the inflation rate, easing the constraint deriving from the zero lower bound and allowing monetary policy to depart from its current ultra-accommodative position. Beyond macroeconomic factors, the book also discusses a supportive financial environment as a precondition for the rebound of global economic activity, stressing that understanding capital flows is a prerequisite for economic-policy decisions.
Author | : Signe Krogstrup |
Publisher | : International Monetary Fund |
Total Pages | : 58 |
Release | : 2019-09-04 |
Genre | : Business & Economics |
ISBN | : 1513511955 |
Download Macroeconomic and Financial Policies for Climate Change Mitigation: A Review of the Literature Book in PDF, ePub and Kindle
Climate change is one of the greatest challenges of this century. Mitigation requires a large-scale transition to a low-carbon economy. This paper provides an overview of the rapidly growing literature on the role of macroeconomic and financial policy tools in enabling this transition. The literature provides a menu of policy tools for mitigation. A key conclusion is that fiscal tools are first in line and central, but can and may need to be complemented by financial and monetary policy instruments. Some tools and policies raise unanswered questions about policy tool assignment and mandates, which we describe. The literature is scarce, however, on the most effective policy mix and the role of mitigation tools and goals in the overall policy framework.