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Journal of Economic Integration 2007 September;22(3) :482-514.
DOI: https://doi.org/10.11130/jei.2007.22.3.482
Disentangling Business Cycles and Macroeconomic policy in Mercosur: a VAR and an Unobserved Components Models Approaches
Jean-Pierre Allegret and 
Alain Sand-Zantman 
Lumière Lyon2
Copyright ©2007 Journal of Economic Integration
ABSTRACT

This paper analyses the feasibility of a monetary union within the Mercosur, focusing on cycle synchronicity. Three questions are addressed, concerning respectively the features of shocks hitting each member, the impact of exchange rate regime differences on countries' responses and the share of common and idiosyncratic components in shocks and policy responses. Shocks are identified through identical country-VARs. This paper concludes that there exists a weak cycle synchronization, due to asymmetric shocks and divergences in policy responses. The endogenous approach in OCA theory can advise the adoption of a common nominal anchor, in order to speed up convergence.

JEL classification: C32, E32, F42

Keywords: Business Cycles | OCA | Co-movement | VAR | Unobserved components model | Mercosur
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