Emi Nakamura

Crises and Recoveries in an Empirical Model of Consumption Disasters

Coauthor(s): Robert Barro, Jón Steinsson, José Ursúa.


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We estimate an empirical model of consumption disasters using new data on consumption for 24 countries over more than 100 years, and study its implications for asset prices. The model allows for partial recoveries after disasters that unfold over multiple years. We find that roughly half of the drop in consumption due to disasters is subsequently reversed. Our model generates a sizable equity premium from disaster risk, but one that is substantially smaller than in simpler models. It implies that a large value of the intertemporal elasticity of substitution is necessary to explain stock-market crashes at the onset of disasters.

Source: American Economic Review: Macroeconomics
Exact Citation:
Barro, Robert, Emi Nakamura, Jón Steinsson, and José Ursúa. "Crises and Recoveries in an Empirical Model of Consumption Disasters." American Economic Review: Macroeconomics 5, no. 3 (July 2013): 35-74.
Volume: 5
Number: 3
Pages: 35-74
Date: 7 2013