In networks with rigidity and leverage, a unique rigid equilibrium exists where Hulten's theorem fails, welfare falls below first-best only if both rigidity and leverage are present, and defaults depend on real shocks plus network structure.
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Rigidity and default in production networks
In networks with rigidity and leverage, a unique rigid equilibrium exists where Hulten's theorem fails, welfare falls below first-best only if both rigidity and leverage are present, and defaults depend on real shocks plus network structure.