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A WELFARE ANALYSIS OF ECONOMIC FLUCTUATIONS IN SOUTH AMERICA

By Fábio Augusto Reis Gomes and Leandro Gonçalves do Nascimento

Abstract

How large are welfare costs associated with economic aggregate fluctuations is a topic of great concern among economists at least since Robert Lucas' well-known and thought-provoking exercise in the late 1980s. Our analysis assesses the magnitude of such costs for nine countries in South America by means of three alternative trend-cycle decomposition methods. The results suggest South American countries have welfare costs of economic fluctuations notably higher than the U. S. economy.

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