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The welfare cost of fluctuations in representative agent economies

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Portier, Franck and Puch, Luis A. (1998) The welfare cost of fluctuations in representative agent economies. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 12, 1998, ]

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Official URL: http://eprints.ucm.es/28801/


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Abstract

In this paper we quantify the welfare cost of fluctuations in a representative agent dynamic equilibrium framework. In doing so, we argue that two key features of Intertemporal Stochastic General Equilibrium Models should not be forgotten: non-linearities and dynamics. We think that these features are often disregarded in the existing literature. We propase a structural measure of the welfare cost of fluctuations, and quantify the role played by dinamics and non-linearities in assessing this cost for some versions of the one sector stochastic growth model. We find that non-linearities do not magnify the cost of fluctuations for walrasian growth models, and our structural measure is close to what has been measured in the literature. That difference becomes sharply larger in non-walrasian cases, where fluctuations magnify equilibrium inefficiencies.

Resumen (otros idiomas)

En este artículo evaluamos el coste de bienestar de las fluctuaciones, en un marco de equilibrio general dinámico de agente representativo, prestando atención a dos elementos clave que a menudo se descuidan en la literatura: dinámica y no linealidades, Para ello, proponemos una medida estructural del coste de bienestar de las fluctuaciones y cuantificamos el papel que juegan la dinámica y las no linealidades para distintas versiones del modelo de crecimiento estocástico de un sector. Encontramos que en entornos warrasianos las no linealidades no magnifican el coste de las fluctuaciones. Sin embargo, en economías no walresianas nuestra medida modifica sustancialmente la evaluación del coste de las fluctuaciones al recoger cómo éstas magnifican las ineficiencias del equilibrio.

Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Cost of Fluctuations; Non linearity; PEA; Business Cycles; Transitions.
Subjects:Social sciences > Economics > Macroeconomics
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:1998
Number:12
ID Code:28801
Deposited On:02 Mar 2015 14:53
Last Modified:02 Mar 2015 14:53

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