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On shock symmetry in South America: New evidence from intra-Brazilian real exchange rates

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  • Christian Rohe

Abstract

I analyze the symmetry of economic shocks in South America by comparing the volatility of unexpected changes in bilateral real exchange rates within an existing monetary union, the intra-Brazilian currency area, with the volatility found in real exchange rates between Brazilian regions and nine South American countries for the 1994-2013 time period. My results show that shocks across South America are substantially less symmetric than shocks within Brazil, indicating potentially high costs if a continent-wide monetary union should eliminate nominal exchange rate exibility between countries.

Suggested Citation

  • Christian Rohe, 2016. "On shock symmetry in South America: New evidence from intra-Brazilian real exchange rates," CQE Working Papers 5316, Center for Quantitative Economics (CQE), University of Muenster.
    • Handle: RePEc:cqe:wpaper:5316
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    More about this item

    Keywords

    Optimum currency area; Real exchange rates; Monetary union;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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