IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Should Central Banks Target Happiness?: Evidence from Latin America

  • Pavel Luengas
  • Inder J. Ruprah

It has become common wisdom amongst monetary policy professionals that central banks in Latin America should adopt inflation targeting. Pure inflation targeting implicitly assumes a social loss welfare function dependent on only inflation. In this working paper, using subjective well-being survey data for Latin America the authors present evidence that both inflation and unemployment reduce wellbeing; where the cost of inflation in terms of unemployment, hence the relative size of the weights in a social well-being function, is about one to eight, almost double of that found for OECD countries. The evidence presented in this paper, combined with the low frequency of happiness data, may not be sufficiently convincing for central banks to adopt happiness-targeting rule. However, happiness data would be useful to inform policy makers regarding the optimal disinflation policy or at least allow consciousness of the potential discontent of different sub-groups of the population of different disinflation strategies.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.iadb.org/document.cfm?pubDetail=1&id=1931319
Our checks indicate that this address may not be valid because: 500 Internal Server Error (http://www.iadb.org/document.cfm?pubDetail=1&id=1931319 [301 Moved Permanently]--> http://publications.iadb.org/document.cfm?id=1931319 [302 Found]--> http://publications.iadb.org/bitstream/11319/3013/1/Should%2520Central%2520Banks%2520Target%2520Happiness%253f%2520Evidence%2520from%2520Latin%2520America.pdf). If this is indeed the case, please notify (Monica Bazan)


Download Restriction: no

Paper provided by Inter-American Development Bank in its series IDB Publications (Working Papers) with number 25818.

as
in new window

Length:
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:idb:brikps:25818
Contact details of provider: Postal: 1300 New York Avenue, NW, Washington, DC 20577
Phone: 202-623-1000
Web page: http://www.iadb.org/publications/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. DiTella, Rafael & MacCulloch, Robert & Oswald, Andrew J., 2001. "Preferences over inflation and unemployment: Evidence from surveys of happiness," ZEI Working Papers B 03-2001, ZEI - Center for European Integration Studies, University of Bonn.
  2. David G. Blanchflower, 2009. "International Evidence on Well-Being," NBER Chapters, in: Measuring the Subjective Well-Being of Nations: National Accounts of Time Use and Well-Being, pages 155-226 National Bureau of Economic Research, Inc.
  3. Rafael Di Tella & Robert MacCulloch, 2006. "Some Uses of Happiness Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 25-46, Winter.
  4. Michael Woodford, 2001. "Inflation Stabilization and Welfare," NBER Working Papers 8071, National Bureau of Economic Research, Inc.
  5. Stevenson, Betsey & Wolfers, Justin, 2008. "Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox," IZA Discussion Papers 3654, Institute for the Study of Labor (IZA).
  6. Moura, Marcelo L. & de Carvalho, Alexandre, 2010. "What can Taylor rules say about monetary policy in Latin America?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 392-404, March.
  7. David G. Blanchflower, 2007. "Is Unemployment More Costly Than Inflation?," NBER Working Papers 13505, National Bureau of Economic Research, Inc.
  8. Wolfers, Justin, 2003. "Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well-Being," International Finance, Wiley Blackwell, vol. 6(1), pages 1-26, Spring.
  9. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-38, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:idb:brikps:25818. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Monica Bazan)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.