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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. 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.
    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. 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.
    4. Francesco Paolo Mongelli, 2002. "'New' views on the optimum currency area theory: what is EMU telling us?," Working Paper Series 138, European Central Bank.
    5. De Grauwe, Paul & Mongelli, F, 2005. "Endogeneities of optimal currency areas: What brings countries sharing a single currency closer together?," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/120944, Katholieke Universiteit Leuven.
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    16. 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.
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    19. DeLisle Worrell, 2003. "A Currency Union for the Caribbean," IMF Working Papers 03/35, International Monetary Fund.
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