An Evaluation of Monetary Regime Options for Latin America

Berg, Andrew; Mauro, Paolo; Borensztein, Eduardo

doi:10.5089/9781451874853.001

Cited by 23 publications

(18 citation statements)

References 27 publications

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“…Or is this extreme case as rare as it is extreme: are there still some advantages of exchange rate flexibility and, by implication, of inflation targeting in all but the most highly dollarized economies? The advocates of this last position point to Peru, a highly dollarized economy that nonetheless has been able to reap benefits from floating-cum-inflation targeting and suggest hopefully that even other highly dollarized Latin American countries will be able to follow its example (see Berg, Borensztein and Mauro 2002).…”

Section: A Modest Proposalmentioning

confidence: 99%

The Monetary Consequences of a Free Trade Area of the Americas

Eichengreen¹,

Taylor²

2003

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How will free trade affect monetary policy and exchange rate regime choices in the Americas? While the European Union illustrates how the creation of an integrated market in goods and services can enhance monetary cooperation and integration, it is not clear that Europe's experience translates to Latin America, where the political circumstances are different. We try to understand whether the monetary consequences of existing regional trade agreements, including but not limited to the European Union, mainly reflect spillovers from trade integration, or whether observed outcomes have been mainly about politics. Our results incline us toward the latter interpretation, leaving us pessimistic about the basis for deeper monetary cooperation. If exchange rate volatility is to be tamed, then the more widespread adoption of inflation targeting, which we find to be associated with a significant reduction in bilateral exchange rate volatility, may be the most promising path.

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Section: A Modest Proposalmentioning

confidence: 99%

The Monetary Consequences of a Free Trade Area of the Americas

Eichengreen¹,

Taylor²

2003

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“…and allowing for contemporaneous correlations between these shocks and the shocks to the other equations in the system (therefore encompassing simpler methods used to assess cross-country business cycle asymmetry such as the correlation analysis of shocks -see Berg et al 2002). This methodology overcomes the identification problem by meaningfully characterizing the dynamic responses of variables of interest to typically observable shocks.…”

Section: Analysis Strategymentioning

confidence: 99%

Domestic versus international determinants of European business cycles: a GVAR approach

2014

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We investigate the sources of macroeconomic (output and inflation) variability in selected European countries within and outside the European Monetary Union: Germany, Italy, Austria, the UK and Poland. Using quarterly data from 1985:1 to 2005:4, we estimate a Global Vector Autoregressive (GVAR) model that includes fifteen countries and regions, covering more than 90 per cent of the World GDP. We find that domestic factors explain most of the macroeconomic variability over the short horizon, i.e. from zero to four quarters, but become progressively dominated by international ones at larger horizons. Regional factors appear to be particularly important. As for output, we detect no significant differences between countries currently members of the European Monetary Union and non-members. As for inflation, on the contrary, regional factors are more influential than those of the rest of the world for the EMU member countries, differently from non-members. Abstract: We investigate the sources of macroeconomic (output and inflation) variability in selectedEuropean countries within and outside the European Monetary Union: Germany, Italy, Austria, the UK and Poland. Using quarterly data from 1985:1 to 2005:4, we estimate a Global Vector Autoregressive (GVAR) model that includes fifteen countries and regions, covering more than 90 per cent of the World GDP. We find that domestic factors explain most of the macroeconomic variability over the short horizon, i.e. from zero to four quarters, but become progressively dominated by international ones at larger horizons. Regional factors appear to be particularly important. As for output, we detect no significant differences between countries currently members of the European Monetary Union and non-members. As for inflation, on the contrary, regional factors are more influential than those of the rest of the world for the EMU member countries, differently from non-members.

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“…Fanelli and González-Rozada (2003) show that spreads exert a significant and negative influence on the common component of cycles in Mercosur countries. Berg, Borensztein, and Mauro (2002) question if LAC are frequently hit by large and common financial shocks. A positive answer could imply that monetary and exchange rate policies should react in a similar way in each country.…”

Section: Introductionmentioning

confidence: 99%

Modeling the Impact of Real and Financial Shocks on Mercosur: The Role of the Exchange Rate Regime

Allégret

Sand

2007

SSRN Journal

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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 statespace 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.

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An Evaluation of Monetary Regime Options for Latin America

Cited by 23 publications

References 27 publications

The Monetary Consequences of a Free Trade Area of the Americas

The Monetary Consequences of a Free Trade Area of the Americas

Domestic versus international determinants of European business cycles: a GVAR approach

Modeling the Impact of Real and Financial Shocks on Mercosur: The Role of the Exchange Rate Regime

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