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Modelling health and output at business cycle horizons for the USA
Author(s) -
Narayan Paresh Kumar
Publication year - 2010
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.1524
Subject(s) - business cycle , economics , shock (circulatory) , health spending , variance (accounting) , new keynesian economics , variance decomposition of forecast errors , monetary economics , macroeconomics , econometrics , health care , monetary policy , economic growth , medicine , health insurance , accounting
In this paper we employ a theoretical framework – a simple macro model augmented with health – that draws guidance from the Keynesian view of business cycles to examine the relative importance of permanent and transitory shocks in explaining variations in health expenditure and output at business cycle horizons for the USA. The variance decomposition analysis of shocks reveals that at business cycle horizons permanent shocks explain the bulk of the variations in output, while transitory shocks explain the bulk of the variations in health expenditures. We undertake a shock decomposition analysis for private health expenditures versus public health expenditures and interestingly find that while transitory shocks are more important for private sector expenditures, permanent shocks dominate public health expenditures. Copyright © 2009 John Wiley & Sons, Ltd.