The Welfare Effects of Economic Fluctuations: Evidence from China and Foreign Countries

Abstract

Abstract:

In this paper, the welfare effects of economic fluctuations are estimated respectively with their per capita consumption data in China, four representative developed countries and eight representative emerging market economies between 1978 and 2010, based on the theoretical model of estimating the welfare effects of economic volatilities by introducing the recursive utility, and then a comprehensive comparative analysis is made to the welfare effects of these several economies' fluctuations. The findings suggest that since the reform and opening up the Chinese economy's stability is growing, and the residents welfare losses from economic fluctuations are reducing significantly. Moreover, Lucas' empirical studies conclusion applies to the representation of the developed countries, but not applies to the representation of emerging market economies exactly. Finally, Relative to the developed countries, it can bring more benefits for Chinese residents through stabilizing economic fluctuations, and the degree of improvement is higher than South Korea, South Africa and Brazil, but less than other representative emerging market economies. Thus, the Chinese government should pay more attention to demand management policies' control efforts and time lag to enhance macroeconomic stability during the process of deepening market economic system reform.

Key words: recursive preferences, economic fluctuations, welfare effects, developed countries, the emerging market economies

Ding Zhifan. The Welfare Effects of Economic Fluctuations: Evidence from China and Foreign Countries[J]. , 2016, 28(3): 54-66.

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