Common currency and economic integration in Mercosul

Luiz Carlos Bresser-Pereira () and Márcio Holland ()

Journal of Post Keynesian Economics, 2009, vol. 32, issue 2, 213-234

Abstract: Latin America has a long history of attempts to achieve regional integration, yet success has been modest. This paper contends that this is essentially due not so much to protectionist practices in the various countries, but to the lack of a common currency or, at least, of a tightly managed exchange rate band. We reviewed the optimum currency area criteria that indicate it is prudent to increase economic integration before attempting to establish exchange rates coordination. It seems fair to say that diminishing exchange rate instability could encourage trade and investment flows across Latin American economies. We also performed a very simplified exercise to understand how feasible efforts would be between policymakers in two large economies (Brazil and Argentina) to achieve exchange rate parity stability and step toward adopting a common currency.

Keywords: common currency; exchange rate; Mercosul (Southern Cone Common Market) (search for similar items in EconPapers)
Date: 2009
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Working Paper: Common currency and economic integration in Mercosur (2009)
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