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Is Business Cycle Volatility Costly? Evidence from Surveys of Subjective Well‐Being
Author(s) -
Wolfers Justin
Publication year - 2003
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/1468-2362.00112
Subject(s) - economics , volatility (finance) , unemployment , happiness , business cycle , quarter (canadian coin) , life satisfaction , econometrics , inflation (cosmology) , monetary economics , implied volatility , subjective well being , macroeconomics , psychology , social psychology , history , physics , archaeology , theoretical physics , psychotherapist
This paper analyses the effects of business cycle volatility on measures of subjective well‐being, including self‐reported happiness and life satisfaction. I find robust evidence that high inflation and, to a greater extent, unemployment lower perceived well‐being. Greater macroeconomic volatility also undermines well‐being. These effects are moderate but important: eliminating unemployment volatility would raise well‐being by an amount roughly equal to that from lowering the average level of unemployment by a quarter of a percentage point. The effects of inflation volatility on well‐being are less easy to detect and are likely smaller.