Abstract
This work argues that the formation of an economic union requires that the homogeneity of domestic economic institutions and the process of regional integration reinforce each other. Granger causality tests on four cases of regional integration in the Americas, Asia and Europe (1975 through 1995) confirm our thesis. These cases include the Andean Pact, the Association of Southeast Asian Nations, the Central American Common Market and the European Union. The most successful case of integration - the European Union - does evince a pattern of positive interaction between the two variables, while less successful cases, found in Latin America, are lacking in this mechanism of mutual influence. We further discuss several regional groups that have recently emerged and use our theoretical implications to assess their future development.
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