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Integration, Interdependence, and Regional Goods: An Application to Mercosur

Author

Listed:
  • Ernesto Talvi

    ()

  • Alfonso S. Bevilaqua

    ()

  • Marcelo Catena

Abstract

The paper is organized as follows. The next section presents some stylized facts on Mercosur, documenting the evolution of trade in goods within member countries and then highlighting the characteristics of the trade agreement that make smaller Mercosur economies vulnerable to macroeconomic developments in Brazil. The subsequent section presents the main empirical contribution of the paper. Specifically, we develop empirical definitions of regional goods and then measure the extent of trade in regional goods by estimating intraregional trade in services, identifying the commodity items that can relatively easily find alternative markets, and calculating three alternative indicators of export exposure. The following section formally incorporates the concept of regional goods into a model of an intertemporal open economy. This model is used to assess Afonso Bevilaqua, Marcelo Catena, and Ernesto Talvi 159 the main channels of the transmission of shocks to the price of regional goods, to perform sensitivity analysis to ascertain the main factors behind vulnerability, and to set the stage for meaningful policy discussions. In the final section, we discuss the policy implications.

Suggested Citation

  • Ernesto Talvi & Alfonso S. Bevilaqua & Marcelo Catena, 2001. "Integration, Interdependence, and Regional Goods: An Application to Mercosur," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2001), pages 153-208, August.
  • Handle: RePEc:col:000425:008702
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    References listed on IDEAS

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    1. Jonathan D. Ostry & Carmen M. Reinhart, 1992. "Private Saving and Terms of Trade Shocks: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 495-517, September.
    2. Reinhart, Carmen M. & Vegh, Carlos A., 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," Journal of Development Economics, Elsevier, vol. 46(2), pages 357-378, April.
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    Cited by:

    1. Baer, Werner & Cavalcanti, Tiago & Silva, Peri, 2002. "Economic integration without policy coordination: the case of Mercosur," Emerging Markets Review, Elsevier, vol. 3(3), pages 269-291, September.
    2. Sebastian Sosa, 2010. "The Influence of “Big Brothers; ” How Important are Regional Factors for Uruguay?," IMF Working Papers 10/60, International Monetary Fund.
    3. Heymann, Daniel & Ramos, Adrián, 2005. "MERCOSUR in transition: macroeconomic perspectives," Documentos de Proyectos 55, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).

    More about this item

    Keywords

    Mercosur; vulnerability; interdependence; Regional Goods; Brazil; Argentina; Uruguay; Paraguay;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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