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Is Mercosur an optimum currency area?

Author

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  • Neves, J. Anchieta
  • Stocco, Leandro
  • Da Silva, Sergio

Abstract

We find that generalized purchasing power parity does not hold for Mercosur, and thus that the South American trade group does not constitute an optimum currency area. We also find that the role of the United States cannot be neglected in the region, and that high short run volatility of real exchange rates is accompanied by slow adjustment processes of between 2 and 16 years (PPP puzzle).

Suggested Citation

  • Neves, J. Anchieta & Stocco, Leandro & Da Silva, Sergio, 2007. "Is Mercosur an optimum currency area?," MPRA Paper 2758, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:2758
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    References listed on IDEAS

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    Cited by:

    1. Agénor, Pierre-Richard & Aizenman, Joshua, 2011. "Capital market imperfections and the theory of optimum currency areas," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1659-1675.
    2. Hebatallah Ghoneim & Rana Abdulmonem & Noha Ghazy, 2021. "Egypt-Mercosur FTA: A Complementarity Analysis," Working Papers 54, The German University in Cairo, Faculty of Management Technology.

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    More about this item

    Keywords

    generalized purchasing power parity; optimum currency area; Mercosur; PPP puzzle;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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