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Does a Monetary Union protect against external shocks?: An assessment of Latin American integration

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  • Allegret, Jean-Pierre
  • Sand-Zantman, Alain

Abstract

This paper analyses the monetary consequences of the Latin American trade integration process. We consider a sample of five countries - Argentina, Brazil, Chile, Mexico and Uruguay - spanning the period 1991-2007. The main question raised pertains to the feasibility of a Monetary Union between L.A. economies. To this end, we study whether this set of countries is characterized by business cycle synchronization with the occurrence of common shocks, a strong similarity in the adjustment process and the convergence of policy responses. We focus especially our attention on two points. First, we try to determine to what extent international disturbances influence the domestic business cycles through trade and/or financial channels. Second, we analyze the impact of the adoption of different exchange rate regimes on the countries' responses to shocks. All these features are the main issues in the literature relative to regional integration and OCA process.

Suggested Citation

  • Allegret, Jean-Pierre & Sand-Zantman, Alain, 2009. "Does a Monetary Union protect against external shocks?: An assessment of Latin American integration," Journal of Policy Modeling, Elsevier, vol. 31(1), pages 102-118.
  • Handle: RePEc:eee:jpolmo:v:31:y:2009:i:1:p:102-118
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    References listed on IDEAS

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    Cited by:

    1. Diamandis, Panayiotis F. & Drakos, Anastassios A., 2011. "Financial liberalization, exchange rates and stock prices: Exogenous shocks in four Latin America countries," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 381-394, May.
    2. Regmi, Krishna & Nikolsko-Rzhevskyy, Alex & Thornton, Robert, 2015. "To be or not to be: An optimum currency area for South Asia?," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 930-944.
    3. Mustafa Kilinc & Cengiz Tunc, 2014. "Identification of Monetary Policy Shocks in Turkey: A Structural VAR Approach," Working Papers 1423, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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