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Economic Integration without Policy Coordination: The Case of MercosurWerner BaerUniversity of Illinois at Urbana-Champaign - Department of Economics Peri A. SilvaUniversity of Illinois at Urbana-Champaign - Department of Economics Tiago CavalcantiNew University of Lisbon U of Illinois, Center for International Business Education & Research Working Paper No. 01-103 Abstract: This paper analyses the evolution of the South American Common Market, Mercosur. It shows how the lack of coordination of macroeconomic policies, especially of the two major participants (Argentina and Brazil), had caused trade strains and conflicting interests in attracting foreign investments. Divergent macro-economic policies have had negative effects on bilateral trade due to the risk averseness (resulting from bilateral exchange rate volatilities) of exporters and importers, and due to the protectionist forces they have brought forth. The paper also shows how the lack of policy coordination caused increased confrontations with respect to Foreign Direct Investment in the region.
Number of Pages in PDF File: 34 Keywords: Mercosur, Policy Coordination JEL Classification: F42, F15, F13, F21 working papers seriesDate posted: October 4, 2001Suggested CitationContact Information
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