On the welfare costs of business cycles: Beyond nondurable goods

Fernando Barros, Gabriel T. Couto and Fábio A.R. Gomes

Journal of Macroeconomics, 2023, vol. 78, issue C

Abstract: This paper constitutes the first effort to measure the welfare costs of economic cycles considering that the consumer derives utility from the consumption of nondurable goods and services and the stock of durable goods. To accomplish such a task, we put forward a novel approach based on a nonseparable utility function. As a result, we take into account the complementarities among the consumption categories and the correlations of the shocks in those series. Our findings for the U.S. economy suggest that the single-good approach in the literature tends to underestimate the welfare costs of business cycles.

Keywords: Welfare costs of business cycles; Nondurable goods; Services; Durable goods (search for similar items in EconPapers)
JEL-codes: C32 E21 E32 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:78:y:2023:i:c:s0164070423000605

DOI: 10.1016/j.jmacro.2023.103560

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