Portier, Franck and Puch González, Luis Antonio (2004) The welfare cost of business cycles in an economy with nonclearing markets. [Working Paper or Technical Report]
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Official URL: http://eprints.ucm.es/7717/
Abstract
In this paper we measure the welfare cost of fluctuations in a simple representative agent economy with nonclearing markets. The market friction we consider involves price rigidities and a voluntary exchange rationing scheme. These features are incorporated into an otherwise standard neoclassical growth model. We show that the frictions we introduce make the losses from fluctuations much bigger than in a frictionless environment.
| Item Type: | Working Paper or Technical Report |
|---|---|
| Additional Information: | JEL classification: E32, C63, C68 |
| Uncontrolled Keywords: | Cost of business cycles, Nonclearing markets, Dynamic general equilibrium |
| Subjects: | Social sciences > Economics > Econometrics |
| Series Name: | Documentos de trabajo del Instituto Complutense de Análisis Económico (ICAE) |
| Volume: | 2004 |
| Number: | 0403 |
| ID Code: | 7717 |
| References: |
Atkeson, A., and C. Phelan (1994): “Reconsidering the costs of business cycles with incomplete markets,” in NBER Macroeconomics Annual, ed. by S. Fischer, and J. Rotemberg, pp. 187–207. MIT Press. Benassy, J. (1993): “Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications,” Journal of Economic Literature, 31(2), 732–761. Benassy, J. (1995): “Money and wages contracts in an optimizing model of the business cycle,”Journal of Monetary Economics, 35(2), 303–15. Epaulard, A., and A. Pommeret (2003): “Recursive utility, endogenous growth, and the welfare cost of volatility,” Review of Economic Dynamics, 6(3), 672–684. Epstein, L., and S. Zin (1991): “Substitution, risk aversion and the temporal behavior of consumption and asset returns: an empirical analysis,” Journal of Political Economy,99(2), 261–86. Imrohoroglu, A. (1988): “Cost of business cycle with indivisibilities and liquidity constraints,” Journal of Political Economy, 97, 1664–83. Krusell, P., and A. Smith (1999): “On the Welfare Effects of Eliminating Business Cycles,” Review of Economic Dynamics, 2(1), 245–272. Lucas, R. (1987): Models of Business Cycles. Basil Blackwell, Oxford. Lucas, R. (2003): “Macroeconomic Priorities,” mimeo, University of Chicago, AEA 2003 Presidential Address. Obstfeld, M. (1994): “Evaluating risky consumption paths: the role of intertemporal substituability,” European Economic Review, 38, 1471–86. |
| Deposited On: | 11 Mar 2008 |
| Last Modified: | 18 Apr 2013 11:19 |
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