ABSTRACT

The question that this chapter addresses is, thus, what factors promote monetary policy harmonization on domestic level; and can the observed changes be explained by the membership in a regional organization? This chapter argues that NAFTA produces spillovers in the monetary realm and enforces adjustment pressures on the United States’ neighbors through trade integration and business cycle synchronization. Hence, it produces an incentive for harmonization efforts in the ¿eld of monetary policy. Due to the relative size of the US market compared with those of Mexico and Canada, it will be assumed in this chapter that

coordination does not have to be tripartite but is rather likely to be an adjustment process of Mexico and Canada to US policies and developments.