account for the average welfare costs of business cycle fluctuations identified in Gali, Gertler, and Lopez- Salido (2003 … approximation to agents expected lifetime utility and evaluate welfare for different modeling schemes of nominal rigidities that all … have the same average duration of contracts. Calvo (1983) wage and price contracts can deliver sizeable welfare costs, but …

scheme is not credible because it will be renegotiated. However, under privatization the government is less informed about … privatization. …