Impact of a Country-crisis on an Integrated Market

Abstract

This thesis examines the impact of a country-crisis in a Free Trade Area (FTA) bloc, and how it affected its Mercosur neighbours. This thesis contains a study of economic integration provided by the creation of Mercosur in March 26th of 1991. Also, a study of relative prices will be made by analysing what happened with the integration on Mercosur after the crisis. Thus, the purpose of this thesis is to analyze price change after the creation of Mercosur, and see what happened after the Argentinian crisis by using disaggregated data on consumer prices, in order to determine variability in prices of similar goods across the Mercosur. By using the Law of One Price (LOP) analysis, it was possible to fathom that after the Mercosur creation a convergence in prices happened due to the Argentinian crisis.