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The FTAA After The Emergence Of the Euro

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  • Schettino, Francesco

Abstract

The aim of this paper is to inquire into the possible relation between the FTAA (Free Trade Area of Americas) and the progressive interna- tionalization of the Euro. We will sustain that the actual productive situation (globalization) makes impossible to think of an FTAA with- out a kind of dollarisation of the Latin American countries (LAC). In fact we argue, helped by empirical analysis, that an economic area can use a sound currency if, and only if, it has a strong link with its issuing country. That is why we analyze, with the principal component anal- ysis, the economic situation of the LAC focusing on their dependence on the U.S. and E.U. economies. We obtain that the LAC, candi- dates for FTAA, are much more dependent from E.U. rather than U.S.; moreover, the future evolution of the banking assets, in relation to external and internal debt, could strengthen this dependence. For these reasons we conclude that the FTAA process could meet some difficulties in the next years, because the LAC economies could prefer to use the Euro as the reference currency for international trade.

Suggested Citation

  • Schettino, Francesco, 2004. "The FTAA After The Emergence Of the Euro," MPRA Paper 3988, University Library of Munich, Germany, revised Jan 2006.
    • Handle: RePEc:pra:mprapa:3988
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    References listed on IDEAS

    as
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    3. Eichengreen, Barry & Mathieson, Donald J., "undated". "The Currency Composition of Foreign Exchange Reserves Retrospect and Prospect," WIDER Working Papers 295509, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
    4. McCauley, R.N., 1997. "The Euro and the Dollar," Princeton Essays in International Economics 205, International Economics Section, Departement of Economics Princeton University,.
    5. Agnès Bénassy-Quéré & Benoît Mojon & Armand-Denis Schor, 1998. "The International Role of the Euro," Working Papers 1998-03, CEPII research center.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Latin America; Principal Component Analysis; Globalization; Currency Areas;
    All these keywords.

    JEL classification:

    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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