Regional monetary integration, Optimum Currency Area (OCA) theory, development theory
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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.
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. Insights 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.
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