Risk Premium Shocks Can Create Inefficient Recessions
نویسندگان
چکیده
Abstract We develop a simple flexible-price model of business cycles driven by spikes in risk premiums. Aggregate shocks increase firms’ uninsurable idiosyncratic and raise show that can create quantitatively plausible recessions, with contractions employment, consumption, investment. Business are inefficient—output, consumption fall too much during compared to the constrained-efficient allocation. Optimal policy involves stimulating employment recessions.
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ژورنال
عنوان ژورنال: The Review of Economic Studies
سال: 2021
ISSN: ['0034-6527', '1467-937X']
DOI: https://doi.org/10.1093/restud/rdab049