Is Mercosur an optimum currency area?
AbstractWe 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).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2758.
Date of creation: 16 Apr 2007
Date of revision:
generalized purchasing power parity; optimum currency area; Mercosur; PPP puzzle;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-21 (All new papers)
- NEP-CBA-2007-04-21 (Central Banking)
- NEP-IFN-2007-04-21 (International Finance)
- NEP-MON-2007-04-21 (Monetary Economics)
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