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Does a Monetary Union protect against external shocks?: An assessment of Latin American integration

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  • Allegret, Jean-Pierre
  • Sand-Zantman, Alain

Abstract

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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 31 (2009)
Issue (Month): 1 ()
Pages: 102-118

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Handle: RePEc:eee:jpolmo:v:31:y:2009:i:1:p:102-118

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Web page: http://www.elsevier.com/locate/inca/505735

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Keywords: Business cycles OCA Bayesian VAR Latin American countries;

References

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Cited by:
  1. Diamandis, Panayiotis F. & Drakos, Anastassios A., 2011. "Financial liberalization, exchange rates and stock prices: Exogenous shocks in four Latin America countries," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 381-394, May.

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