Title: South-south monetary integration: the case for a research framework beyond the theory of optimum currency area

Authors: Barbara Fritz, Laurissa Muhlich

Addresses: Freie Universitat Berlin, Lateinamerika-Institut, Rudesheimer Strasse 54-56, 14197 Berlin, Germany. ' Freie Universitat Berlin, Lateinamerika-Institut, Rudesheimer Strasse 54-56, 14197 Berlin, Germany

Abstract: Optimum Currency Area (OCA) theory proves inadequate in the analysis of the new regional monetary integration schemes that have sprung up among developing and emerging market economies since the 1990s. Building on the concept of |original sin| developed by Eichengreen et al. (2006), we argue that a different conceptual framework is needed as these regional monetary South-South integration (SSI) schemes differ fundamentally from North-South arrangements because they involve none of the international reserve currencies. In-sights from the cases of monetary south-south cooperation in Southern Africa, East Asia and Latin America suggest that SSI can have beneficial effects on macroeconomic stability. This paper sketches a first set of hypotheses on the necessary conditions for these stability gains to materialise.

Keywords: regional monetary integration; optimum currency area; OCA theory; development theory; ASEAN; MERCOSUR; CMA; developing countries; emerging economies; market economies; monetary cooperation; south-south cooperation; Southern Africa; East Asia; Latin America; macroeconomic stability.

DOI: 10.1504/IJPP.2010.031210

International Journal of Public Policy, 2010 Vol.6 No.1/2, pp.118 - 135

Published online: 25 Jan 2010 *

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