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In this paper, I examine the welfare consequences of conventional approximation methods in business cycle analysis: the log-linear approximation of model dynamics and the second-order approximation of social welfare. In a canonical New Keynesian model, the approximation around the deterministic...
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We construct an optimizing-agent model of a closed economy which is simple enough that we can use it to make exact utility calculations. There is a stabilization problem because there are one-period nominal contracts for wages, or prices, or both and shocks that are unknown at the time when...
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. In particular, a European grant contributes to the German governmental program for equalizing regional unemployment. The …. At first, the dependence of the unemployment rate on the amount of aid is estimated for each eligible region. Using this … dependence, the variance of regional unemployment rates is expressed as a function of the regional subsidies. The optimal aid …
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