Abstract
Abstract How large are welfare costs related to economic aggregate fluctuations is a topic of great concern among economists at least since L ucas's (1987) model. Our analysis assesses the magnitude of such costs for T urkey by means of two approaches: aggregate and disaggregate. The former approach uses aggregate data employing three alternative trend‐cycle decomposition methods which are L ucas' classical set‐up with deterministic linear trend for consumption, H odrick and P rescott filter and one in which consumption trend is stochastic and whose implementation is performed using B everidge– N elson decomposition. The results of both approaches suggest that Turkey has high welfare costs associated with business cycles.
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