Dote.Choper 6: Vnartanty and lurrent Acun
T
= The Great Modea tus
-reters to the pered in us starting 19484, choacted by sigaihios
redoction in velatility of real per cepita CDP growtn
- era ot stability coinuded emurgene ot lnge pesuual Us th detirn
nth
- the idea is to explore link between una-tainty preeantinong sogs
impacton CA. how unarlaintg alteat CA?
- Causes ot Greal Mrdroliın:
L7 Good luch: expercenad smallo. shocks compored to 1980
Good pdieg: agressi-t low inlletion puiny & good montay ond rsgulala
polecy Cad to stabilitg
in structual chonge inventory monegemon't ond tech derlepoints allo-ed
firms to display smouth f/ow ot opeetis sudon
ompidude it busross ry
- Our intirest to explore possibu convitions betuaen. Geet Modratua
and signiticont Ch dettriorateun clerernd in us
Open unumy unth UnadaioG
- Primiry gool 1s to determini if thre is causul lintk betwen Gant Modint
and CA detin
-Itutim:
.fhiny wnurtain insome in period 2, hunnd precantnorg sard perods
hedye aguinst a
alliw. them to had incoms realisotion in perud 2
-Thus cuvumplen fall n pererd I TB improred
-it intutın is ngh1 -7 decton incom urartanty -7 elovotion in CA deteurt
- Есолому wthout Una-tamly CFoundatunal Midl)
To urdustand unurlointy, first establiuh the buselie case wher tutun incoe 5
knonn with atoinds
-Output o perfeatly smootn
•enduaments Qi=02= Q Knuun uth artorns so cunsumptiun is aso
. Viloy le 1logc perfectly smroth.
initial assele(fo) and i=0 • No med to use CA to
Smouth Cunsemplim ove tim
11件
mur
lrglit log 12a-Ci)
7B=Q-L CAгoВо T
CISQ,(2=Q =0
, Date. 7
- Introducing Unardainty: Prxcontimoy Saring Mechavis o
• suppuse Q, sa asendonmnt hut ar is unartan
s01o mth pebahility a tyoodstat)
astao wh pabotitg ta thod ihat)
ELQ.)= & Cat os t k Ca-6) =Q (muon prserving 1Avon rtont
•pwamiter 6 measures the degree of unartainty:
Var CQa) = ELQ) - (EG))"
(16) ²十気比Qー6) 20²1
=CQ4226 16² ) +½C0² -206162J
=62
Co is the sd. of ar)
State Contngent Inempural Budget lonstrant
442 =f fatlato) pruhehiltg I good star)
Larca-os tprtohlily thad doles
which cmples 2a46-6r probobiling to (godstats
620-6-7i prubabitiry & (bod skts
• expected ulilhty : log &Ellogla) = log li t & log lr (gord stohd t
lag Li Chad stoths
CzCs) is a of the stoes thet will reatise in perud2
functecn
max luglı tElogcza + 6 -6) + ½ log C 2a-6-)
C
(Uts) (LHS) C
FOC: t= Cauoc 24-6-C
Mu ot cns in expectid Mu at cons.
peried plceed 2
- Detining Pincautiunury Surings though Prawt
itae ul the "arlanty" selutn CC=a)
RHS & LHS herce C=Q 1s mot thsdntin
This is beranse Mu tenation C) s vex ond RASMu (bedstot) isthigt
to equalye, houschedd mud redac Cica ond Mu will Heud
Detmiton: tho droe in carient consumplien to hedye against tutue bod outcun
is called precantionong savings
, Date.
M
Sulid tine is MUot CiCti)asa functen otCi
- Suppore Ci2a, then Mu ot Ci= ta
Li in this c0rs, lr enthr a-6 bra16 ond Muith
C
eithr a-
drrrder nWly or
ni 210
:tdorep C1
a
thentore)
Mutcibis pboe
belon B looa
esneld MU
MV), whur Li0,
Q6 a Q10
-Sappue Ci= Q, MUot C, = a CA),
t (2
n
erther Q-6
=0tosiUM delrepxs
or Q16 and MU ut
oTE )o- esther r6 o бTа (BоC)
LoD is ubore A CMUvconvass thendors C1=2 then Muot Ci behnuc
n ths sthons that ik ne set God,CT + 20-6-ni J
t2 i1 follons that howsshild wwuld be beter ott cnsuming leisin
perod I ond more un pervudr (Pracantuunay SurgsT)
Unurtanty, 1B ond сA
-An nwwre in unardointy (trum say 6=0) couIn on Improvementn
TB ord LA
1B = Q- 4 70
CAro Bo 17B, 70 (Sina Brassund o)
- Pecall that vader artarnto TB, =CA, =0, we have meos preserriay nreng
in unurlonty hods to lon impruvement in 1B ond oA
-Similarly, a tall in unarlents deterivratis in 13 ond A
-Reduction in onlput voletilits that com unth Grect Midrotion shuuld
Contribuh to obseived cuncusrarnd derativn ot VS Cs
-Boad hodding (= N2IPJ T as unuidemtT : BI=Q-C
'it 6nan, C falls und Bi ncreud
bis a find that mays seme relera in gersed 2 Citit) ngudls otstale inp,
Thus huanhold sanrut boy a putthes ot awets nty dilt stale centingead prgitt
in perird 2
• thal pogs wore in lows endowment stuh ond
asset leis in
in high endowmurs
state, krng as insurar. find
•For thw reosons the pevont mudl has Incompile asset marld with Bipejili
T
= The Great Modea tus
-reters to the pered in us starting 19484, choacted by sigaihios
redoction in velatility of real per cepita CDP growtn
- era ot stability coinuded emurgene ot lnge pesuual Us th detirn
nth
- the idea is to explore link between una-tainty preeantinong sogs
impacton CA. how unarlaintg alteat CA?
- Causes ot Greal Mrdroliın:
L7 Good luch: expercenad smallo. shocks compored to 1980
Good pdieg: agressi-t low inlletion puiny & good montay ond rsgulala
polecy Cad to stabilitg
in structual chonge inventory monegemon't ond tech derlepoints allo-ed
firms to display smouth f/ow ot opeetis sudon
ompidude it busross ry
- Our intirest to explore possibu convitions betuaen. Geet Modratua
and signiticont Ch dettriorateun clerernd in us
Open unumy unth UnadaioG
- Primiry gool 1s to determini if thre is causul lintk betwen Gant Modint
and CA detin
-Itutim:
.fhiny wnurtain insome in period 2, hunnd precantnorg sard perods
hedye aguinst a
alliw. them to had incoms realisotion in perud 2
-Thus cuvumplen fall n pererd I TB improred
-it intutın is ngh1 -7 decton incom urartanty -7 elovotion in CA deteurt
- Есолому wthout Una-tamly CFoundatunal Midl)
To urdustand unurlointy, first establiuh the buselie case wher tutun incoe 5
knonn with atoinds
-Output o perfeatly smootn
•enduaments Qi=02= Q Knuun uth artorns so cunsumptiun is aso
. Viloy le 1logc perfectly smroth.
initial assele(fo) and i=0 • No med to use CA to
Smouth Cunsemplim ove tim
11件
mur
lrglit log 12a-Ci)
7B=Q-L CAгoВо T
CISQ,(2=Q =0
, Date. 7
- Introducing Unardainty: Prxcontimoy Saring Mechavis o
• suppuse Q, sa asendonmnt hut ar is unartan
s01o mth pebahility a tyoodstat)
astao wh pabotitg ta thod ihat)
ELQ.)= & Cat os t k Ca-6) =Q (muon prserving 1Avon rtont
•pwamiter 6 measures the degree of unartainty:
Var CQa) = ELQ) - (EG))"
(16) ²十気比Qー6) 20²1
=CQ4226 16² ) +½C0² -206162J
=62
Co is the sd. of ar)
State Contngent Inempural Budget lonstrant
442 =f fatlato) pruhehiltg I good star)
Larca-os tprtohlily thad doles
which cmples 2a46-6r probobiling to (godstats
620-6-7i prubabitiry & (bod skts
• expected ulilhty : log &Ellogla) = log li t & log lr (gord stohd t
lag Li Chad stoths
CzCs) is a of the stoes thet will reatise in perud2
functecn
max luglı tElogcza + 6 -6) + ½ log C 2a-6-)
C
(Uts) (LHS) C
FOC: t= Cauoc 24-6-C
Mu ot cns in expectid Mu at cons.
peried plceed 2
- Detining Pincautiunury Surings though Prawt
itae ul the "arlanty" selutn CC=a)
RHS & LHS herce C=Q 1s mot thsdntin
This is beranse Mu tenation C) s vex ond RASMu (bedstot) isthigt
to equalye, houschedd mud redac Cica ond Mu will Heud
Detmiton: tho droe in carient consumplien to hedye against tutue bod outcun
is called precantionong savings
, Date.
M
Sulid tine is MUot CiCti)asa functen otCi
- Suppore Ci2a, then Mu ot Ci= ta
Li in this c0rs, lr enthr a-6 bra16 ond Muith
C
eithr a-
drrrder nWly or
ni 210
:tdorep C1
a
thentore)
Mutcibis pboe
belon B looa
esneld MU
MV), whur Li0,
Q6 a Q10
-Sappue Ci= Q, MUot C, = a CA),
t (2
n
erther Q-6
=0tosiUM delrepxs
or Q16 and MU ut
oTE )o- esther r6 o бTа (BоC)
LoD is ubore A CMUvconvass thendors C1=2 then Muot Ci behnuc
n ths sthons that ik ne set God,CT + 20-6-ni J
t2 i1 follons that howsshild wwuld be beter ott cnsuming leisin
perod I ond more un pervudr (Pracantuunay SurgsT)
Unurtanty, 1B ond сA
-An nwwre in unardointy (trum say 6=0) couIn on Improvementn
TB ord LA
1B = Q- 4 70
CAro Bo 17B, 70 (Sina Brassund o)
- Pecall that vader artarnto TB, =CA, =0, we have meos preserriay nreng
in unurlonty hods to lon impruvement in 1B ond oA
-Similarly, a tall in unarlents deterivratis in 13 ond A
-Reduction in onlput voletilits that com unth Grect Midrotion shuuld
Contribuh to obseived cuncusrarnd derativn ot VS Cs
-Boad hodding (= N2IPJ T as unuidemtT : BI=Q-C
'it 6nan, C falls und Bi ncreud
bis a find that mays seme relera in gersed 2 Citit) ngudls otstale inp,
Thus huanhold sanrut boy a putthes ot awets nty dilt stale centingead prgitt
in perird 2
• thal pogs wore in lows endowment stuh ond
asset leis in
in high endowmurs
state, krng as insurar. find
•For thw reosons the pevont mudl has Incompile asset marld with Bipejili
