MERCOSUR: A new approach to regional integration?

The purpose of this paper is to empirically analize the economic potential associated with MERCOSUR. Simple import share analysis indicates increasing trade flows between the member states; ex post income elasticities of import demand fail to detect a clear pattern. Estimates of technological specialization reveal a great potential for intra-industry trade between member states. The most important challenge to MERCOSUR seems to be the still uncertain ability of member states to sustain macroeconomic stabilization in the long run.