Economic Integration in Latin America

This study examines the feasibility of economic integration in Latin America. We analyze the existence of the long-term and short-term common movements among key macro variables-real GDP, intra-regional trade, private investment and consumption-in the seven largest economies in Latin America-Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. The joint behavior of the long term trends and the joint response to transitory shocks suggest a significant degree of economic synchronization among these countries. Our results reveal that the economic fluctuations in these countries follow a similar pattern in terms of duration, intensity, response, and timing both in the long run and in the short run. The findings suggest that the group of seven economies in Latin America can lead the path of integration in the region more smoothly as macroeconomic conditions are favorable for them to do so.