Abstract:
We construct a DSGE model system with risk and insurance elements to quantify the influence of property and health risk on the economic fluctuations in China. We also study the combination of the expected shocks of risk elements and economic fluctuations in a DSGE frame. We find that: (1) Existence of insurance system can reduce the impact of risk shocks on economic fluctuations. (2) Reducing the excess of insurance and the degree of loss caused by property and health risk, and increasing the effective competition in insurance market can effectively alleviate the economic fluctuations. (3) Performances of expected shocks of property and health risk to economic fluctuations are different. Furthermore, we construct a new model which includes both capital and labor, and the research based on the new model does not change the basic conclusion.
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