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This paper reproduces Lucas's analysis of the costs of business cycles in an economy with a low probability, crash state in consumption growth. For reasonable parameter values, it is shown that the presence of a crash state dramatically increases the costs ofconsumption volatility. Specifically,...
Persistent link: https://www.econbiz.de/10010266389
This paper reproduces Lucas's analysis of the costs of business cycles in an economy with a low probability, crash state in consumption growth. For reasonable parameter values, it is shown that the presence of a crash state dramatically increases the costs of consumption volatility....
Persistent link: https://www.econbiz.de/10014063294