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Regional Monetary Integration among Developing Countries: New Opportunities for Macroeconomic Stability beyond the Theory of Optimum Currency Areas?

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Listed:
  • Barbara Fritz

    () (Department of Economics and at the Latin American Institute of Freie Universität Berlin)

  • Laurissa Mühlich

    () (Department of Economics and at the Latin American Institute of Freie Universität Berlin)

Abstract

Optimum Currency Area (OCA) approaches turn to be inadequate in the analysis of the new regional monetary integration schemes that have sprung up among developing and emerging market economies. Instead, in accordance with the concept of ‘original sin’ (Eichengreen et al.) we argue that regional monetary South-South integration schemes that, unlike North-South arrangements, involve none of the international reserve currencies, have specific monetary constraints and implications which need to be duly considered. A first comparative analysis of three cases of monetary South-South cooperation in South Africa (CMA), East Asia (ASEAN) and Latin America (Mercosur) shows that these can indeed provide macroeconomic stability gains but that this strongly depends on the existence of economic hierarchies within these integration schemes.

Suggested Citation

  • Barbara Fritz & Laurissa Mühlich, 2006. "Regional Monetary Integration among Developing Countries: New Opportunities for Macroeconomic Stability beyond the Theory of Optimum Currency Areas?," GIGA Working Paper Series 38, GIGA German Institute of Global and Area Studies.
  • Handle: RePEc:gig:wpaper:38
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    References listed on IDEAS

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    Keywords

    regional monetary integration; monetary integration theory; development theory; ASEAN; Mercosur; CMA;

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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