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South-south monetary integration: the case for a research framework beyond the theory of optimum currency area

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  • Fritz, Barbara
  • Mühlich, Laurissa
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    Abstract

    Optimum Currency Area (OCA) theory proves inadequate in the analysis of the new regional monetary integration schemes that have sprung up among developing and emerging market economies since the 1990s. Building on the concept of ‘original sin’ developed by Eichengreen et al. we argue that a different conceptual framework is needed as these regional monetary South-South integration (SSI) schemes differ fundamentally from North-South arrangements because they involve none of the international reserve currencies. Insights from the cases of monetary south-south cooperation in Southern Africa, East Asia and Latin America suggest that SSI can have beneficial effects on macroeconomic stability. This paper sketches a first set of hypotheses on the necessary conditions for these stability gains to materialise. --

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    Bibliographic Info

    Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2007/20.

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    Date of creation: 2007
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    Handle: RePEc:zbw:fubsbe:200720

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    Keywords: Regional Monetary Integration ; Optimum Currency Area (OCA) Theory ; Development Theory ; ASEAN ; MERCOSUR ; CMA;

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    1. Morris Goldstein & Philip Turner, 2004. "Controlling Currency Mismatches in Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 373.
    2. John D. Burger & Francis E. Warnock, 2006. "Foreign Participation in Local Currency Bond Markets," NBER Working Papers 12548, National Bureau of Economic Research, Inc.
    3. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
    4. Paul De Grauwe & Gunther Schnabl, 2008. "Exchange Rate Stability, Inflation, and Growth in (South) Eastern and Central Europe," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 530-549, 08.
    5. Hausmann, Ricardo & Panizza, Ugo, 2003. "On the determinants of Original Sin: an empirical investigation," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 957-990, December.
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    8. Mehl, Arnaud & Reynaud, Julien, 2005. "The determinants of ‘domestic’ original sin in emerging market economies," Working Paper Series 0560, European Central Bank.
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    18. Blommestein Hans J & Santiso Javier, 2007. "New Strategies for Emerging Domestic Sovereign Bond Markets in the Global Financial Landscape," Global Economy Journal, De Gruyter, vol. 7(2), pages 1-58, June.
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