The Nobel Prize in Economics, Paul Krugman, spoke of the initiative for a common currency between Argentina and Brazil: “It’s a terrible idea”condemned.
“With everything else going on, I haven’t commented on the proposal for a monetary union between Argentina and Brazil. But it is a good opportunity to apply the theory of optimal currency areas, which tells us it’s a very bad ideaKrugman, who received the 2008 Nobel Prize in Economics, said via Twitter.
Krugman followed up on his idea in a thread:
“A shared currency can make sense between economies that are each other’s major trading partners and are similar enough not to face large ‘asymmetric shocks.’ So here is Brazil’s export destination,” he said.
In that same post, the economist, with 27 books by his authorship, continued: “Argentina sends more to Brazil, because Brazil’s economy is bigger, but still only 15%. And the export structure of the two countries is very different”.
“Argentine exports are substantially all agricultural; more than half of those in Brazil are manufactured or combustible. So, shocks to the world economy are likely to cause large changes in the equilibrium real exchange rateKrugman added.
“I don’t know who came up with this idea, but surely he was not someone who knew anything about international monetary economics“, he concluded.
A week ago and in the midst of the visit of the president of Brazil, Inacio Lula Da Silva, another who had spoken about it via networks was the owner of Tesla, Elon Musk. The reaction from the other Twitter owner was favourable. “Probably a good idea”he tweeted days ago.
But for Olivier Blanchard, MIT professor emeritus and former IMF chief economist: “This is crazy”he tweeted.
NS
Source: Clarin
