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 and Michael Weber
Additional contact information
Dimitris Georgarakos: European Central Bank
Kwang Hwan Kim: Yonsei University
Olivier Coibion: University of Texas at Austin
Myungkyu Shim: Yonsei University
Myunghwan Andrew Lee: New York University
Geoff Kenny: European Central Bank
Seowoo Han: Yonsei University

No 17675, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using 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 around 5-6% 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 around 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.

Keywords: cost of business cycles; willingness to pay; inflation (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2025-02
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://docs.iza.org/dp17675.pdf (application/pdf)

Related works:
Working Paper: How Costly Are Business Cycle Volatility and Inflation? A Vox Populi Approach (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp17675

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().