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It's a Small Small Welfare Cost of Fluctuations

Franck Portier () and Luis Puch ()

No 2005-26, Working Papers from FEDEA

Abstract: Lucas [1987] has shown that in a representative agent framework, the potential welfare gain from stabilizing consumption around its mean is small. We provide an example and some insight for why Lucas' measure is an upper bound of the welfare cost of fluctuations in walrasian economies.

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