Does a Monetary Union protect against external shocks?

This paper analyses the monetary consequences of the Latin American trade integration process. We consider a sample of five countries – Argentina, Brazil, Chile, Mexico and Uruguay – spanning the period 1991–2007. The main question raised pertains to the feasibility of a Monetary Union between L.A....

Full description

Saved in:
Bibliographic Details
Published in:Journal of policy modeling 2009, Vol.31 (1), p.102-118
Main Authors: Allegret, Jean-Pierre, Sand-Zantman, Alain
Format: Article
Language:English
Subjects:
Bayesian VAR
Business cycles
Economic shock
Exchange rates
Latin America
Latin American countries
Monetary unions
OCA
Optimal currency area
Regional integration
Trade relations
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper analyses the monetary consequences of the Latin American trade integration process. We consider a sample of five countries – Argentina, Brazil, Chile, Mexico and Uruguay – spanning the period 1991–2007. The main question raised pertains to the feasibility of a Monetary Union between L.A. economies. To this end, we study whether this set of countries is characterized by business cycle synchronization with the occurrence of common shocks, a strong similarity in the adjustment process and the convergence of policy responses. We focus especially our attention on two points. First, we try to determine to what extent international disturbances influence the domestic business cycles through trade and/or financial channels. Second, we analyze the impact of the adoption of different exchange rate regimes on the countries’ responses to shocks. All these features are the main issues in the literature relative to regional integration and OCA process.
ISSN:0161-8938
1873-8060
DOI:10.1016/j.jpolmod.2008.09.002