The Welfare Cost of Business Cycles in an Economy with Nonclearing Markets
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.
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- Per Krusell & Anthony A. Smith, Jr., 1999.
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in: NBER Macroeconomics Annual 1994, Volume 9, pages 187-218
National Bureau of Economic Research, Inc.
- Andrew Atkeson & Christopher Phelan, 1994. "Reconsidering the Costs of Business Cycles with Incomplete Markets," NBER Working Papers 4719, National Bureau of Economic Research, Inc.
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