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Implementation of the European Monetary Union and Its Sustainability, 1999-2002: Recommendations from a Dynamic Game

Author

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  • Sophia Aguirre, Maria

    (The Catholic University of America)

Abstract

This paper presents a dynamic theoretic model of monetary union break - downs that result from violations of the macroeconomic targets agreed upon at the time of monetary integration. Non-cooperative behavior of two constituen - cies or interest groups results in multiple possible equilibria. The paper ana - lyzes the conditions of financing and the cost of maintaining the targets that will determine whether or not a monetary union member will be subject to for - eign reserves depletion or, in the extreme, an exchange rate attack. In addition, it provides the decision rule for European countries to determine if they should continue to participate in the monetary union or withdraw from it. Therefore, it indirectly provides an intuition for the conditions required for the monetary union to succeed.

Suggested Citation

  • Sophia Aguirre, Maria, 2000. "Implementation of the European Monetary Union and Its Sustainability, 1999-2002: Recommendations from a Dynamic Game," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 19-46.
    • Handle: RePEc:ris:integr:0123
    as

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    Citations

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    Cited by:

    1. Francesco Menoncin & Marco Tronzano, 2005. "Is a Monetary Union a Never-Ending Story?," Revue économique, Presses de Sciences-Po, vol. 56(1), pages 25-49.

    More about this item

    Keywords

    European Monetary Union; EU; Economic integration;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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