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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

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  1. James J. Heckman & Carmen Pages, 2000. "The Cost of Job Security Regulation: Evidence from Latin American Labor Markets," NBER Working Papers 7773, National Bureau of Economic Research, Inc.
  2. 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.
  3. 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.
  4. 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.
  5. Andrew K. Rose, 1995. "After the Deluge: Do Fixed Exchange Rates Allow Inter-Temporal Volatility Tradeoffs?," NBER Working Papers 5219, National Bureau of Economic Research, Inc.
  6. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
  7. 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.
  8. Eichengreen, Barry, 1998. "Does Mercosur Need a Single Currency?," Center for International and Development Economics Research, Working Paper Series qt6fw631qn, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  9. Olivier Jeanne & Andrew K Rose, 1999. "Noise trading and exchange rate regimes," Reserve Bank of New Zealand Discussion Paper Series G99/2, Reserve Bank of New Zealand.
  10. Reinhart, Carmen & Calvo, Guillermo, 2001. "Fixing for your life," MPRA Paper 13873, University Library of Munich, Germany.
  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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