Consumption, Leisure, and Cross-country Welfare Costs of Business Cycles

Marcelo Mello and Christiano Coelho ()
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Christiano Coelho: Ibmec/RJ and State University of Rio de Janeiro

Economics Bulletin, 2020, vol. 40, issue 1, 61-76

Abstract: We compute the welfare costs of business cycles for a broad panel of countries with aggregate data over the period 1950-2014. We find substantial cross-country variability in the estimated welfare costs of business cycles. Welfare costs appear to be larger in Latin American and Asian economies. Additionally, for some individual countries, the estimated welfare costs of business cycles are an order of magnitude larger than for the U.S. economy. Our estimates are robust to different country groupings, e.g., Advanced Economies vs. Emerging Markets, or Inflation Targeters vs. non-Targeters, different time periods, and the inclusion of the labor-leisure tradeoff in the utility function.

Keywords: Welfare Costs of Business Cycles; Consumption; Leisure-Hours; Business Cycles (search for similar items in EconPapers)
JEL-codes: E3 E6 (search for similar items in EconPapers)
Date: 2020-01-06
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