Is Latin America an Optimum Currency Area? Evidence from a Structural Vector Autoregression Analysis
Journal title STUDI ECONOMICI
Author/s Foresti Pasquale
Publishing Year 2012 Issue 2011/104 Language English
Pages 26 P. 43-68 File size 735 KB
DOI 10.3280/STE2011-104003
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This paper evaluates the advisability of a monetary union in Latin America applying the theory of optimum currency areas (OCA). The analysis is based on the traditional OCA criteria and it suggests that there is no evidence for any monetary integration in Latin America even at a sub-regional level. Latin American countries have evidenced a low degree of trade integration and asymmetric co-movements among their shocks. Moreover, substantial differences in the speed of adjustment and in the size of shocks are found. Hence, higher policy coordination seems to be necessary before starting any economic integration process in Latin America.
Keywords: Optimum Currency Areas, Asymmetric Shocks, Latin America, sVAR. .
Jel codes: C15, C30, F15, F42
Foresti Pasquale, Is Latin America an Optimum Currency Area? Evidence from a Structural Vector Autoregression Analysis in "STUDI ECONOMICI " 104/2011, pp 43-68, DOI: 10.3280/STE2011-104003