It’s a Small Small Welfare Cost of Fluctuations

Franck Portier () and Luis Puch

Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

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.

Keywords: Cost; of; Business; Cycles; –; Dynamic; General; Equilibrium (search for similar items in EconPapers)
JEL-codes: C63 C68 E32 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2005
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