The Welfare Cost of Business Cycles in an Economy with Non-Clearing Markets
In this Paper we measure the welfare cost of fluctuations in a simple representative agent economy with non-clearing 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.
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- Aude Pommeret & Anne Epaulard, 2001.
"Recursive Utility, Endogenous Growth, and the Welfare Cost of Volatility,"
IMF Working Papers
01/5, International Monetary Fund.
- 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.
- 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.
- 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.
- Maurice Obstfeld, 1995.
"Evaluating Risky Consumption Paths: The Role of Intertemporal Substitutability,"
NBER Technical Working Papers
0120, National Bureau of Economic Research, Inc.
- Obstfeld, Maurice, 1994. "Evaluating risky consumption paths: The role of intertemporal substitutability," European Economic Review, Elsevier, vol. 38(7), pages 1471-1486, August.
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