Mercosur is currently going through an intermediate integration stage in which macroeconomic interdependence acquires more importance. Then, the need arises to adopt strategic definitions with regard to the future of the process itself. The study examines macroeconomic interdependence with a macroeconomic computable general equilibrium model. This enables an estimation of the sign and extent of transmission of shocks originating either in a Mercosur country or in the rest of the world. The results of the model simulations show that interdependence has important effects. We discuss the possibility of implementing a process of cooperation as an alternative to play Nash in some key policies.

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New economic geography models show that patterns of uneven development may arise with larger integration. This renders interesting to analyze the evolution of income disparities in Mercosur. That is the purpose of this paper. The study indicates that income disparities across Mercosur countries and regions have increased during the 1990s. A preliminary analysis regarding the impact of the creation of the bloc, however, shows that the integration process might not be at the origin of this trend.

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We analyze the feasibility of a Monetary Union in the Andean Community of Nations, based on OCA theory. If partner economies have achieved considerable integration, the viability of a Monetary Union is a matter of symmetric responses to shocks. To determine if partner countries are symmetric, we make use of several business cycle analysis' tools. Even though Andean countries are not perfectly synchronized, they share important features, which might facilitate the adoption of a common currency.

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The paper shows new estimates for trade elasticities in Brazil using time-varying parameters to control for structural breaks. Main results are: changes in exports long-run elasticities with no evidence of major short-run changes, except to goods with comparative advantages; trade liberalization and price stabilization as imports’ main structural determinants; no conclusive results about the role of exchange rate volatility and regime in trade; and no support to the residual exports hypothesis.

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In this paper, we estimate sectoral elasticities of substitution between Latin American and Chinese products to forecast how alternative policy scenarios may affect Latin American exports to the U.S market. We find that a 20 percent appreciation of the renminbi reduces Chinese exports by a fifth and increases Latin American exports by 0.5%. The removal of MFA quotas would lead to a 75 percent increase in Chinese sales and a 10 percent decrease of Latin American exports to the US market.

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This paper develops a methodology for decomposing cross-country variation in export unit values into quality versus real price components. We show that price variation not associated with variation in export product quality can be identified using information on countries' trade balance, and introduce a technique for adjusting the bounds to incorporate this information. Finally, we use our methodology to estimate the evolution of U.S. trading partner export quality from 1974 to 2001.

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