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The Welfare Cost of Business Cycles in an Economy with Nonclearing Markets

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Author Info
Franck Portier (University of Toulouse)
Luis Puch (FEDEA, Universidad Complutense and ICAE)

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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 four times bigger than in a frictionless environment.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Topics in Macroeconomics.

Volume (Year): 6 (2007)
Issue (Month): 3 ()
Pages: 1151-1151
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Handle: RePEc:bep:mactop:v:6:y:2007:i:3:p:1151-1151

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Related research
Keywords: cost of business cycles nonclearing markets dynamic general equilibrium

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Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Per Krusell & Anthony A. Smith, Jr., . "On the Welfare Effects of Eliminating Business Cycles," GSIA Working Papers 243, Carnegie Mellon University, Tepper School of Business. [Downloadable!]
    Other versions:
  2. Imrohoruglu, Ayse, 1989. "Cost of Business Cycles with Indivisibilities and Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1364-83, December. [Downloadable!] (restricted)
  3. Anne Epaulard & Aude Pommeret, 2003. "Recursive Utility, Endogenous Growth, and the Welfare Cost of Volatility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(3), pages 672-684, July. [Downloadable!] (restricted)
    Other versions:
  4. Epstein, Larry G & Zin, Stanley E, 1991. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 263-86, April. [Downloadable!] (restricted)
  5. Andrew Atkeson & Christopher Phelan, 1994. "Reconsidering the Costs of Business Cycles with Incomplete Markets," NBER Working Papers 4719, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Benassy, Jean-Pascal, 1993. "Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 732-61, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gadi Barlevy, 2005. "The cost of business cycles and the benefits of stabilization," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 32-49. [Downloadable!]
  2. Andrés J. Marchante Mera & Bienvenido Ortega Aguaza & José Sánchez Maldonado, 2006. "Las dimensiones del bienestar en las Comunidades Autónomas Españolas. Un análisis de Sigma y Gamma-Convergencia," Working Papers 2006-05, FEDEA. [Downloadable!]
  3. Pedro N. Rodríguez, & Simón Sosvilla-Rivero, 2006. "Understanding and Forecasting Stock Price Changes," Working Papers 2006-03, FEDEA. [Downloadable!]
  4. Gadi Barlevy, 2004. "The Cost of Business Cycles and the Benefits of Stabilization: A Survey," NBER Working Papers 10926, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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