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

Author

Listed:
  • Marcelo A Mello

    (Ibmec/RJ, and State University of Rio de Janeiro)

  • Christiano A Coelho

    (Ibmec/RJ and State University of Rio de Janeiro)

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.

Suggested Citation

  • Marcelo A Mello & Christiano A Coelho, 2020. "Consumption, Leisure, and Cross-country Welfare Costs of Business Cycles," Economics Bulletin, AccessEcon, vol. 40(1), pages 61-76.
    • Handle: RePEc:ebl:ecbull:eb-18-00817
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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