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

Author

Listed:
  • Busse, Matthias
  • Hefeker, Carsten
  • Koopmann, Georg

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.

Suggested Citation

  • Busse, Matthias & Hefeker, Carsten & Koopmann, Georg, 2004. "Between Two Poles: Matching Trade and Exchange Rate Regimes in Mercosur," HWWA Discussion Papers 301, Hamburg Institute of International Economics (HWWA).
    • Handle: RePEc:zbw:hwwadp:26327
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    Cited by:

    1. Barbara Pfeffer, 2008. "Do regional Trade and Specialization drive intra-regional Risk-Sharing?," MAGKS Papers on Economics 200813, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. nnamdi, Kelechi & ifionu, Ebele, 2013. "Exchange rate volatility and exchange rate uncertainty in Nigeria: a financial econometric analysis (1970- 2012)," MPRA Paper 48316, University Library of Munich, Germany, revised 2013.

    More about this item

    Keywords

    Exchange Rate Regime; Currency Board; Latin America; Mercosur;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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