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Is EMU a Blueprint for Mercosur?

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Author Info
Eduardo Levy
Federico Sturzenegger

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Abstract

In this paper, we explore the advantages and disadvantages of a monetary union between Mercosur countries in light of the recent European experience. We address the issue both from the perspective of the traditional optimal currency area (OCA) theory as well as from the approach that emphasizes the credibility gains that a monetary union can provide for inflation prone economies. We find that, at the current stage, the standard OCA preconditions for a currency area are not present in Mercosur. on the other hand, from a credibility standpoint, the European model highlights the lack of an anchor country in the region, therefore suggesting the convenience of a monetary union that includes the U.S. We also examine the case of full dollarization, which we believe is the alternative to a Pan-American currency union that most closely resembles the European model.

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Publisher Info
Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.

Volume (Year): 37 (2000)
Issue (Month): 110 ()
Pages: 63-99
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Handle: RePEc:ioe:cuadec:v:37:y:2000:i:110:p:63-99

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Related research
Keywords: Currency Union; Dollarization; Mercosur; EMU;

Find related papers by JEL classification:
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Fischer, Stanley, 1982. "Seigniorage and the Case for a National Money," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 295-313, April. [Downloadable!] (restricted)
  2. 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.
    Other versions:
  3. Robert N. McCauley & William R. White, 1997. "The Euro and European financial markets," BIS Working Papers 41, Bank for International Settlements. [Downloadable!]
  4. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September. [Downloadable!] (restricted)
  5. Barry Eichengreen., 1992. "A Consumer's Guide to EMU," Economics Working Papers 92-200, University of California at Berkeley.
  6. Tamim Bayoumi, 1991. "The Effect of the ERM on Participating Economies," IMF Working Papers 91/86, International Monetary Fund.
  7. Maurice Obstfeld, 1997. "Europe's gamble," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997-2), pages 241-317. [Downloadable!]
  8. Rudiger Dornbusch & Ferico Sturzenegger & Holger Wolf, 1990. "Extreme Inflation: Dynamics and Stabilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990-2), pages 1-84. [Downloadable!]
  9. Angel J. Ubide & Norman Loayza & J. Humberto Lopez, 1999. "Sectorial Macroeconomic Interdependencies - Evidence for Latin America, East Asia and Europe," IMF Working Papers 99/11, International Monetary Fund.
  10. Alain Ize & Eduardo Levy Yeyati, 1998. "Dollarization of Financial Intermediation: Causes and Policy Implications," IMF Working Papers 98/28, International Monetary Fund.
  11. Bayoumi, T. & Eichengreen, B., 1994. "One Money or Many? Analysing the Prospects for Monetary Unification in Various Parts of the World," Princeton Studies in International Economics 76, International Economics Section, Departement of Economics Princeton University,.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eduard Hochreiter & Klaus Schmidt-Hebbel & Georg Winckler, 2002. "Monetary Union: European Lessons, Latin American Prospects," Working Papers Central Bank of Chile 167, Central Bank of Chile. [Downloadable!]
    Other versions:
  2. Foresti, Pasquale, 2007. "Is Latin America an Optimal Currency Area? Evidence from a Structural Vector Auto-regression analysis," MPRA Paper 2961, University Library of Munich, Germany, revised Apr 2008. [Downloadable!]
  3. Sophie Chauvin, 2001. "Exit Options for Argentina with a Special Focus on Their Impact on External Trade," Working Papers 2001-07, CEPII research center. [Downloadable!]
  4. Ansgar Belke & Kai Geisslreither & Daniel Gros, 2004. "On the Relationship Between Exchange Rates and Interest Rates: Evidence from the Southern Cone," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 232/2004, Department of Economics, University of Hohenheim, Germany. [Downloadable!]
    Other versions:
  5. William C. Gruben & Mark A. Wynne & Carlos E.J.M. Zarazaga, 2001. "Dollarization and monetary unions: implementation guidelines," Center for Latin America Working Papers 0201, Federal Reserve Bank of Dallas. [Downloadable!]
  6. Mejia-Reyes, P., 2004. "Classical Business Cycles in America: Are National Business Cycles Synchronised?," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 1(3), pages 75-102. [Downloadable!]
  7. Jorge Eduardo Carrera & Mariano Feliz & Demian Panigo & Marcelo Saavedra, 2001. "Dollarization as an Asymmetric Monetary Union. The Case of Argentina," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 043, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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