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Disentangling business cycles and macroeconomic policy in Mercosur: a VAR and unobserved components model approaches

  • Jean-Pierre Allegret

    ()

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

  • Alain Sand-Zantman

    ()

    (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)

This paper analyses the feasibility of a monetary union within the Mercosur, focusing on cycle synchronicity. Three questions are addressed, concerning respectively the features of shocks hitting each member, the impact of exchange rate regime differences on countries' responses and the share of common and idiosyncratic components in shocks and policy responses. Shocks are identified through identical country-VARs. This paper concludes that there exists a weak cycle synchronization, due to asymmetric shocks and divergences in policy responses. The endogenous approach in OCA theory can advise the adoption of a common nominal anchor, in order to speed up convergence.

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Paper provided by HAL in its series Post-Print with number halshs-00238495.

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Date of creation: 2007
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Publication status: Published, Journal of Economic Integration, 2007, 22, 3, 482-514
Handle: RePEc:hal:journl:halshs-00238495
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00238495/en/
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