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The Cost of Financial Market Variability in the Southern Cone

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  • Ansgar Belke
  • Daniel Gros

Abstract

The paper evaluates the costs and benefits of exchange rate (and interest rate) stability for the countries in the Southern Cone of Latin America. It investigates the correlation between two aspects of financial market volatility, namely that of the exchange rate and interest rate volatility, during the last three decades, comparing the situation in the Southern Cone to that in the eu (pre-emu). It also analyses the impact of both aspects of financial volatility on investment and labor markets in the Southern Cone, finding that both exchange rate and interest rate variability have a significant dampening impact on employment and investment.

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Bibliographic Info

Article provided by Presses de Sciences-Po in its journal Revue économique.

Volume (Year): 54 (2003)
Issue (Month): 5 ()
Pages: 1091-1115

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Handle: RePEc:cai:recosp:reco_545_1091

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Web page: http://www.cairn.info/revue-economique.htm

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  1. Carmen M. Reinhart & Vincent R. Reinhart, 2001. "What Hurts Most? G-3 Exchange Rate or Interest Rate Volatility," NBER Working Papers 8535, National Bureau of Economic Research, Inc.
  2. Flood, R.P. & Rose, A.K., 1992. "Fixing Exchange Rates: A Virtual Quest for Fundamentals," Papers 529, Stockholm - International Economic Studies.
  3. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  4. Olivier Jeanne & Andrew K Rose, 1999. "Noise trading and exchange rate regimes," Reserve Bank of New Zealand Discussion Paper Series G99/2, Reserve Bank of New Zealand.
  5. Rose, Andrew K, 1995. "After the Deluge: Do Fixed Exchange Rates Allow Inter-temporal Volatility Trade-offs?," CEPR Discussion Papers 1240, C.E.P.R. Discussion Papers.
  6. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fixing for Your Life," NBER Working Papers 8006, National Bureau of Economic Research, Inc.
  7. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  8. Matteo Bugamelli & Luigi Infante, 2003. "Sunk Costs of Exports," Temi di discussione (Economic working papers) 469, Bank of Italy, Economic Research and International Relations Area.
  9. Barry Eichengreen., 1998. "Does Mercosur Need a Single Currency?," Center for International and Development Economics Research (CIDER) Working Papers C98-103, University of California at Berkeley.
  10. Ansgar Belke & Daniel Gros, 2001. "Designing EU-US Atlantic Monetary Relations: Exchange Rate Variability and Labor Markets," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 195/2001, Department of Economics, University of Hohenheim, Germany.
  11. Ansgar Belke & Daniel Gros, 2001. "Real Impacts of Intra-European Exchange Rate Variability: A Case for EMU?," Open Economies Review, Springer, vol. 12(3), pages 231-264, July.
  12. Carmen Pagés-Serra & James J. Heckman, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," IDB Publications 4119, Inter-American Development Bank.
  13. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
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Cited by:
  1. Ansgar Belke & Ralph Setzer, 2004. "Contagion, herding and exchange-rate instability — A survey," Intereconomics: Review of European Economic Policy, Springer, vol. 39(4), pages 222-228, July.
  2. Ansgar Belke & Lars Wang, 2005. "The Costs and Benefits of Monetary Integration Reconsidered: How to Measure Economic Openness," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 262/2005, Department of Economics, University of Hohenheim, Germany.

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