Is Mercosur an optimum currency area?

Neves, J. Anchieta and Stocco, Leandro and Da Silva, Sergio (2007): Is Mercosur an optimum currency area?

Abstract

We find that generalized purchasing power parity does not hold for Mercosur, and thus that the South American trade group does not constitute an optimum currency area. We also find that the role of the United States cannot be neglected in the region, and that high short run volatility of real exchange rates is accompanied by slow adjustment processes of between 2 and 16 years (PPP puzzle).

• Item Type: MPRA Paper
• Institution: Federal University of Santa Catarina
• Language: English
• Keywords: generalized purchasing power parity; optimum currency area; Mercosur; PPP puzzle
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration

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