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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
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  1. Barry Eichengreen, 2000. "Does Mercosur Need a Single Currency?," International Finance 0003006, EconWPA.
  2. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
  3. Jeanne, Olivier & Rose, Andrew K, 1999. "Noise Trading and Exchange Rate Regimes," CEPR Discussion Papers 2142, C.E.P.R. Discussion Papers.
  4. Reinhart, Carmen & Reinhart, Vincent, 2001. "What hurts most?: G-3 exchange rate or interest rate volatility," MPRA Paper 14098, University Library of Munich, Germany.
  5. Carmen Pagés-Serra & James J. Heckman, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," Research Department Publications 4227, Inter-American Development Bank, Research Department.
  6. Reinhart, Carmen & Calvo, Guillermo, 2001. "Fixing for your life," MPRA Paper 13873, University Library of Munich, Germany.
  7. Rose, Andrew K, 1995. "After the Deluge: Do Fixed Exchange Rates Allow Inter-temporal Volatility Trade-offs?," CEPR Discussion Papers 1240, C.E.P.R. Discussion Papers.
  8. 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.
  9. 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.
  10. Carmen Pagés-Serra, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  11. 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.
  12. 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.
  13. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
  14. Carmen M. Reinhart & Vincent Raymond Reinhart, 2002. "What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 133-170 National Bureau of Economic Research, Inc.
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