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

Franck Portier () and Luis A. Puch ()

No 2005-18, Working Papers from FEDEA

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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Related works:
Working Paper: The Welfare Cost of Business Cycles in an Economy with Nonclearing Markets (2004)
Working Paper: The Welfare Cost of Business Cycles in an Economy with Nonclearing Markets (2004)
Working Paper: The Welfare Cost of Business Cycles in an Economy with Non-Clearing Markets (2004)
Journal Article: The Welfare Cost of Business Cycles in an Economy with Nonclearing Markets (2007)
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