Disentangling business cycles and macroeconomic policy in Mercosur: a VAR and unobserved components model approaches

Jean-Pierre Allegret (1) , Alain Sand-Zantman (1)

1 GATE - Groupe d'analyse et de théorie économique

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.

Mots clés: Business Cycles; OCA; Co-movement; VAR; Unobserved components model; Mercosur

Domaines: Economies et finances

Jean-Pierre Allegret, Alain Sand-Zantman. Disentangling business cycles and macroeconomic policy in Mercosur: a VAR and unobserved components model approaches. Journal of Economic Integration, 2007, 22 (3), pp.482-514. ⟨halshs-00238495⟩