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Does a Monetary Union protect again foreign shocks? An assessment of Latin American integration using a Bayesian VAR

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  • Jean-Pierre Allégret

    ()
    (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)

  • Alain Sand-Zantman

    ()
    (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)

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

Paper provided by Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure in its series Working Papers with number 0809.

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Length: 20 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:gat:wpaper:0809

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Keywords: bayesian VAR; business cycles; Latin American countries; optimum currency area;

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  16. Rose, Andrew K, 2006. "A Stable International Monetary System Emerges: Bretton Woods, Reversed," CEPR Discussion Papers 5854, C.E.P.R. Discussion Papers.
  17. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
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