Determining Factors for the Formation of an Optimum Currency Area: An Analysis of the Pacific Alliance Countries + 4 (2018-2023)

Abstract

The issue of economic cooperation and integration in the Latin American region has been a topic of regional and global debate since its founding as nation-states. It is from this discussion that various initiatives have emerged, such as the Andean Community of Nations and the Southern Common Market (Mercosur). However, the Pacific Alliance now appears promising in terms of trade and its potential progress towards monetary and political issues have been attractive to academia. This justifies its research, as well as the evaluation and analysis of its integration into an Optimum Currency Area through the influence of labor mobility and the symmetry of shocks. Through a theoretical review and an econometric model of multiple linear regression and a correlational analysis, the aim is to analyze the formation of an optimum currency area between the countries of the Pacific Alliance +4 in the period 2018-2023; The results highlight significant differences in the economic structure and GDP per capita among the countries of the bloc, which represents a challenge to achieve solid economic cohesion, in which it is worth highlighting that for each percentage point increase in trade integration, GDP per capita increases by $341.25, thus, the implementation of a common monetary policy in this region would depend on the capacity of the countries to strengthen economic adjustment mechanisms and cooperation in matters of financial stability, thus promoting balanced growth and cohesion within the group.