Are all economic fluctuations bad for consumers?

Are business cycles always costly? This paper sheds new light on this question in the context of a two-sector neoclassical business cycle model by focusing on the roles of the origin of shocks and the degree of real frictions that restrict factor reallocation both inter-temporally (investment adjustment cost) and intra-temporally (inter-sectoral factor immobilities). We find that under the benchmark parameterization, investment-specific technology shocks are welfare-improving while consumption-specific technology shocks are welfare-detrimental, regardless of the degree of real frictions. While aggregate TFP shocks can be both depending on the degree of real frictions, welfare-improving business cycles are not supported by empirical evidence.