Can South America form an optimal monetary area? A structural vector autoregression analysis
Entidad
UAM. Departamento de Análisis Económico, Teoría Económica e Historia EconómicaEditor
Springer NatureFecha de edición
2020-10-14Cita
10.1007/s10368-020-00490-2
International Economics and Economic Policy 18.1 (2020): 309-329
ISSN
1612-4804 (print); 1612-4812 (online)DOI
10.1007/s10368-020-00490-2Versión del editor
https://doi.org/10.1007/s10368-020-00490-2Materias
Common currency; South America; SVAR; Variance decomposition; EconomíaDerechos
© 2020 The AuthorsResumen
This research analyzes the feasibility of adopting a common currency in South America using the Optimal Monetary Areas theory. Taking into account that the relative dominance of regional shocks in local output is considered a key indicator to adopt a regional currency, we use a structural vector autoregression (SVAR) model to determine what type of shock —among global, regional or country specific— prevails in South American economies. The results of variance decomposition demonstrate that the output trajectory of South American countries is mainly explained by country-specific shocks; therefore, South America as a whole is not considered not an optimal monetary area. However, we identified a group of countries —named Sud-5 (comprised of Chile, Peru, Ecuador, Brazil and Argentina)— for which the costs of a hypothetical monetary union would be relatively lower.
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Google Scholar:Padilla, León
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Rodríguez García-Brazales, Ángel
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