Between Two Poles: Matching Trade and Exchange Rate Regimes in Mercosur

Matthias Busse, Carsten Hefeker and Georg Koopmann

No 301, HWWA Discussion Papers from Hamburg Institute of International Economics (HWWA)

Abstract: The paper reviews exchange rate options for Mercosur countries. We start from the observation that most of the countries in the region have a longstanding tendency to adopt fixed exchange rates, and ask how such a system could best be designed. The Argentine crisis has demonstrated that unilateral currency pegs imply the risk of serious misalignments with other trading partners and subsequent realignments. The standard basket peg is not a solution because of its limited transparency and credibility. We therefore discuss a proposal to create dual currency boards that could be a workable solution for the Mercosur countries.

Keywords: Exchange Rate Regime; Currency Board; Latin America; Mercosur (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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Working Paper: Between Two Poles: Matching Trade and Exchange Rate Regimes in Mercosur (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hwwadp:26327

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