Costain, James S.; Reiter, Michael - Department of Economics and Business, Universitat … - 2004
We construct and calibrate a general equilibrium business cycle model with unemployment and precautionary saving. We … compute the cost of business cycles and locate the optimum in a set of simple cyclical fiscal policies. Our economy exhibits … productivity shocks, giving firms an incentive to hire more when productivity is high. However, business cycles make workers …