Is Latin America an Optimum Currency Area? Evidence from a Structural Vector Autoregression Analysis

Pasquale Foresti

STUDI ECONOMICI, 2011, vol. LXVI, issue 104, 43-68

Abstract: 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. . (search for similar items in EconPapers)
JEL-codes: C15 C30 F15 F42 (search for similar items in EconPapers)
Date: 2011
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Working Paper: Is Latin America an Optimal Currency Area? Evidence from a Structural Vector Auto-regression analysis (2008)
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