Modeling the impact of real and financial shocks on Mercosur: the role of the exchange rate regime

Jean-Pierre Allegret () and Alain Sand ()
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Jean-Pierre Allegret: GATE CNRS
Alain Sand: GATE CNRS

No 701, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: This paper studies to what extent the diversity of exchange rate regimes within Mercosur exerts an influence on the feasibility of a monetary union in this area. A semi-structural VAR model is built for each country, including a set of international and domestic variables. Based on impulse response functions and forecast error decomposition, we conclude that differences of exchange rate regime explain significantly the divergences of economic dynamics triggered by foreign or domestic shocks. Second, we decompose the structural innovations generated by each country model into unobservable common and idiosyncratic components, using a state-space model. This last exercise, intended to assess the degree of policy coordination between the Mercosur members, did not disclose any common component for the structural innovations generated by the three national models.

Keywords: co-movement; cycles; Mercosur; optimum currency area; unobserved components model; VAR (search for similar items in EconPapers)
JEL-codes: C32 E32 F42 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2007-01
New Economics Papers: this item is included in nep-ifn and nep-mac
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ftp://ftp.gate.cnrs.fr/RePEc/2007/0701.pdf (application/pdf)

Related works:
Journal Article: Modeling the Impact of Real and Financial Shocks on Mercosur: The Role of the Exchange Rate Regime (2009)
Working Paper: Modeling the Impact of Real and Financial Shocks on Mercosur: the Role of the Exchange Rate Regime (2007)
Working Paper: Modeling the impact of real and financial shocks on Mercosur: the role of the exchange rate regime (2007)
Working Paper: Modeling the impact of real and financial shocks on Mercosur: the role of the exchange rate regime (2007)
Working Paper: Modeling the impact of real and financial shocks on Mercosur: the role of the exchange rate regime (2007)
Working Paper: Modeling the impact of real and financial shocks on Mercosur: the role of the exchange rate regime (2007)
Working Paper: Modeling the impact of real and financial shocks on Mercosur: the role of the exchange rate regime (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:gat:wpaper:0701

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