Till Geography Do Us Part? Prolegomena to an Economic and Monetary Union between the Dominican Republic and Haiti

This paper offers a preliminary assessment of the potential benefits and costs of an economic and monetary union (EMU) between the Dominican Republic and Haiti. These two countries share the same island but have a history of conflict and divergent economic prospects in recent decades. The paper reviews the historical context, examines the nature of potential benefits and costs, and conducts a preliminary analysis using basic statistical techniques of some key criteria for the formation of an economic and monetary union between the two countries. A more formal analysis of business cycle synchronization, based on basic and extended integrated vector auto-regression models with exogenous variables (VARX), is developed. Overall, the analysis suggests that at this stage several economic criteria are not satisfied for the two countries to fully benefit from an economic and monetary union. At the same time, however, the endogeneity of most of these criteria militates in favor of an aggressive medium-term agenda for integration between them.