A BEJM Topics article.

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.

Submitted: July 24, 2003 · Accepted: July 17, 2005 · Published: January 15, 2007

Originally published in Topics in Macroeconomics.

Recommended Citation

Portier, Franck and Puch, Luis A. (2006) "The Welfare Cost of Business Cycles in an Economy with Nonclearing Markets," Topics in Macroeconomics: Vol. 6 : Iss. 3, Article 7.
Available at: http://www.bepress.com/bejm/topics/vol6/iss3/art7