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The Cost of Financial Market Variability in the Southern Cone

  • Ansgar Belke
  • Daniel Gros

The paper evaluates the costs and benefits of exchange rate (and interest rate) stability for the countries in the Southern Cone of Latin America. It investigates the correlation between two aspects of financial market volatility, namely that of the exchange rate and interest rate volatility, during the last three decades, comparing the situation in the Southern Cone to that in the eu (pre-emu). It also analyses the impact of both aspects of financial volatility on investment and labor markets in the Southern Cone, finding that both exchange rate and interest rate variability have a significant dampening impact on employment and investment.

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Article provided by Presses de Sciences-Po in its journal Revue économique.

Volume (Year): 54 (2003)
Issue (Month): 5 ()
Pages: 1091-1115

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Handle: RePEc:cai:recosp:reco_545_1091
Contact details of provider: Web page: http://www.cairn.info/revue-economique.htm

References listed on IDEAS
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  1. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  2. Carmen Pagés-Serra & James J. Heckman, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," IDB Publications (Working Papers) 4119, Inter-American Development Bank.
  3. Rose, Andrew K, 1996. "After the Deluge: Do Fixed Exchange Rates Allow Inter-temporal Volatility Tradeoffs?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 1(1), pages 47-54, January.
  4. Reinhart, Carmen & Calvo, Guillermo, 2002. "Fear of floating," MPRA Paper 14000, University Library of Munich, Germany.
  5. Flood, Robert P & Rose, Andrew K, 1993. "Fixing Exchange Rates: A Virtual Quest for Fundamentals," CEPR Discussion Papers 838, C.E.P.R. Discussion Papers.
  6. Barry Eichengreen, 2000. "Does Mercosur Need a Single Currency?," International Finance 0003006, EconWPA.
  7. Ansgar Belke & Daniel Gros, 2001. "Designing EU-US Atlantic Monetary Relations: Exchange Rate Variability and Labor Markets," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 195/2001, Department of Economics, University of Hohenheim, Germany.
  8. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fixing for Your Life," NBER Working Papers 8006, National Bureau of Economic Research, Inc.
  9. Carmen M. Reinhart & Vincent R. Reinhart, 2001. "What Hurts Most? G-3 Exchange Rate or Interest Rate Volatility," NBER Working Papers 8535, National Bureau of Economic Research, Inc.
  10. Olivier Jeanne & Andrew K. Rose, 2002. "Noise Trading And Exchange Rate Regimes," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 537-569, May.
  11. Dixit, Avinash K, 1989. "Entry and Exit Decisions under Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 620-38, June.
  12. Matteo Bugamelli & Luigi Infante, 2003. "Sunk Costs of Exports," Temi di discussione (Economic working papers) 469, Bank of Italy, Economic Research and International Relations Area.
  13. Ansgar Belke & Daniel Gros, 2001. "Real Impacts of Intra-European Exchange Rate Variability: A Case for EMU?," Open Economies Review, Springer, vol. 12(3), pages 231-264, July.
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