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The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa / Nimark, Kristoffer / Wang, Pengfei

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

Franck Portier
  • 1University of Toulouse,
/ Luis A. Puch
  • 2FEDEA, Universidad Complutense and ICAE,
Published Online: 2007-01-15 | DOI: https://doi.org/10.2202/1534-5998.1151

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.

Keywords: cost of business cycles; nonclearing markets; dynamic general equilibrium

About the article

Published Online: 2007-01-15


Citation Information: The B.E. Journal of Macroeconomics, ISSN (Online) 1534-5998, DOI: https://doi.org/10.2202/1534-5998.1151.

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