How Costly Are Business Cycle Volatility and Inflation? A Vox Populi Approach / Dimitris Georgarakos, Kwang Hwan Kim, Olivier Coibion, Myungkyu Shim, Myunghwan Andrew Lee, Yuriy Gorodnichenko, Geoff Kenny, Seowoo Han, Michael Weber.

Format:

Book

Author/Creator:

Georgarakos, Dimitris.

Contributor:

Kim, Kwang Hwan.

Coibion, Olivier.

Shim, Myungkyu.

Lee, Myunghwan Andrew.

Gorodnichenko, Yuriy.

Kenny, Geoff.

Han, Seowoo.

Weber, Michael.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w33476.

NBER working paper series no. w33476

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

How Costly Are Business Cycle Volatility and Inflation?

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2025.

Summary:

Using repeated surveys of households across thirteen countries, we study how much individuals would be willing to pay to eliminate business cycles. These direct estimates are much higher than traditional measures following Lucas (2003): on average, households would be prepared to sacrifice ≈6% of their lifetime consumption to eliminate business cycle fluctuations. A similar result holds for inflation: to bring inflation to their desired rate, individuals would be willing to sacrifice ≈5% of their consumption. Willingness to pay to eliminate business cycles and inflation is generally higher for those whose consumption is more pro-cyclical, those who are more uncertain about the economic outlook, and those who live in countries with greater historical volatility.

Notes:

February 2025.

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