IDEAS home Printed from https://ideas.repec.org/p/yon/wpaper/2025rwp-241.html
   My bibliography  Save this paper

How Costly Are Business Cycle Volatility And Inflation? A Vox Populi Approach

Author

Listed:
  • Dimitris Georgarakos

    (European Central Bank & CEPR)

  • Kwang Hwan Kim

    (Yonsei University)

  • Oliver Coibion

    (UT Austin & NBER)

  • Myungkyu Shim

    (Yonsei University)

  • Myunghwan Andrew Lee

    (New York University)

  • Yuriy Gorodnichenko

    (UC Berkley, CEPR, & NBER)

  • Geoff Kenny

    (European Central Bank)

  • Seowoo Han

    (Yonsei University)

  • Michael Weber

    (Chicago Booth, CEPR, & NBER)

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.

Suggested Citation

  • Dimitris Georgarakos & Kwang Hwan Kim & Oliver Coibion & Myungkyu Shim & Myunghwan Andrew Lee & Yuriy Gorodnichenko & Geoff Kenny & Seowoo Han & Michael Weber, 2025. "How Costly Are Business Cycle Volatility And Inflation? A Vox Populi Approach," Working papers 2025rwp-241, Yonsei University, Yonsei Economics Research Institute.
    • Handle: RePEc:yon:wpaper:2025rwp-241
    as

    Download full text from publisher

    File URL: http://121.254.254.220/repec/yon/wpaper/2025rwp-241.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    cost of business cycles; willingness to pay; inflation;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:yon:wpaper:2025rwp-241. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: YERI (email available below). General contact details of provider: https://edirc.repec.org/data/eryonkr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.