Comparative Analisys Of Shocks In The Mercosur

CARRERA, JORGE; FÉLIZ, MARIANO; PANIGO

Montevideo

Congreso; XIV Jornadas de Economía del Banco Central del Uruguay; 1999

Banco Central del Uruguay

This paper examines the nature of the shocks that affect the economies of Argentina and Brazil, countries that are undergoing a process of accelerated economic integration. Knowing this is crucial to determine the convenience of a further increase in economic integration, and thus in monetary integration. We discuss the relationship between economic integration and greater interdependence presenting the implementation of the cost-benefit analysis to determine the optimality of a monetary area and among them we highlight the crucial role that the symmetry of shocks plays in the determination of the costs of integration. Next we move on to the dynamic analysis of the empirical evidence with the construction of a VEC (Vector Error Correcting) model. We choose a model that allows us to test the characteristics of the shocks, selecting two common external variables (the international interest rate and export prices) and two endogenous variables (the domestic supply represented by the GDP and domestic represented by inflation). With our model, we analyze the degree of association between the shocks hitting the countries and also the impulse–response function and the variance decomposition of shocks