Table 5 Welfare costs of fiscal shocks...

Table 5

Welfare costs of fiscal shocks (capital spending)

	${\bar{π}}^{*} = {1.02}^{0.25}$		${\bar{π}}^{*} = {1.06}^{0.25}$
Welfare cost		0.08%		0.08%
Welfare	−193.43	−193.61	−199.61	−199.78
$U_{d}$	−192.79	−192.79	−193.66	−193.66
$U_{l}$	−0.44	−0.45	−4.37	−4.41
$U_{v}$	−0.20	−0.37	−1.60	−1.71
$C_{S S}$	0.93	0.93	0.93	0.93
$H_{S S}$	1.0008	1.0008	1.0008	1.0008
E(C)*	−0.40	−0.41	−0.394	−0.397
E(H)*	0.01	0.01	0.14	0.14
100 $σ_{C}$	0.68	0.93	1.97	2.04
100 $σ_{H}$	1.28	1.54	1.66	1.90

	${\bar{π}}^{*} = {1.02}^{0.25}$		${\bar{π}}^{*} = {1.06}^{0.25}$
Welfare cost		0.08%		0.08%
Welfare	−193.43	−193.61	−199.61	−199.78
$U_{d}$	−192.79	−192.79	−193.66	−193.66
$U_{l}$	−0.44	−0.45	−4.37	−4.41
$U_{v}$	−0.20	−0.37	−1.60	−1.71
$C_{S S}$	0.93	0.93	0.93	0.93
$H_{S S}$	1.0008	1.0008	1.0008	1.0008
E(C)*	−0.40	−0.41	−0.394	−0.397
E(H)*	0.01	0.01	0.14	0.14
100 $σ_{C}$	0.68	0.93	1.97	2.04
100 $σ_{H}$	1.28	1.54	1.66	1.90

Note(s): *Expressed as a percentage deviation from the deterministic steady-state. $U_{d}$ ⁠, $U_{l}$ and $U_{v}$ are the deterministic steady-state, level and volatility components, respectively $\bar{g} = 1.07; ρ_{g} = 0.85; σ_{g} = 0.007$

Source(s): Author's calculation

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