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Have a Break, Have A ... National Currency: When Do Monetary Unions Fall Apart?

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  • Nitsch, Volker

Abstract

Historically, dissolutions of currency unions are not unusual. I use an annual panel data set covering 245 country pairs that use a common currency (of which 128 are dissolved) from 1948 through 1997 to characterize currency union exits. I find that departures from a currency union tend to occur when there is a large inflation differential between member countries, when the currency union involves a country which is closed to international trade and trade flows dry up, and when there is a change in the political status of a member. In general, however, macroeconomic factors have only little predictive power for currency union dissolutions.
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  • Nitsch, Volker, 2005. "Have a Break, Have A ... National Currency: When Do Monetary Unions Fall Apart?," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 34834, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    • Handle: RePEc:dar:wpaper:34834
    Note: for complete metadata visit http://tubiblio.ulb.tu-darmstadt.de/34834/
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    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    2. Rose, Andrew K & Engel, Charles, 2002. "Currency Unions and International Integration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1067-1089, November.
    3. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
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    5. Roberto Chang & Andres Velasco, 2002. "Dollarization: Analytical Issues," NBER Working Papers 8838, National Bureau of Economic Research, Inc.
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    7. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. La prevalenza del declino
      by Alberto Bagnai in Goofynomics on 2013-02-17 00:13:00
    2. Unioni monetarie e integrazione economica
      by Alberto Bagnai in Goofynomics on 2016-03-28 14:23:00
    3. Debito pubblico: quelli che ‘la monetizzazione si fa coi miniassegni…’
      by Alberto Bagnai in Il Fatto Quotidiano on 2014-04-08 11:52:45
    4. Uscita dall’euro: quelli che ‘la benzina andrebbe a 3000 lire’
      by Alberto Bagnai in Il Fatto Quotidiano on 2015-01-06 20:04:31

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    Cited by:

    1. Carsten Hefeker & Michael Neugart, 2015. "Fiscal Transfers in a Monetary Union with Exit Option," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 489-508, August.
    2. Montalbano, Pierluigi & Nenci, Silvia & Dell'Agostino, Laura, 2022. "A non-parametric assessment of the effects of the Euro on GVC trade," International Economics, Elsevier, vol. 172(C), pages 56-76.
    3. Giuseppe Bertola & John Driffill & Harold James & Hans-Werner Sinn & Jan-Egbert Sturm & Ákos Valentinyi, 2013. "Chapter 2: European Imbalances," EEAG Report on the European Economy, CESifo, vol. 0, pages 55-72, February.
    4. Pomfret, Richard, 2005. "Sequencing trade and monetary integration: issues and application to Asia," Journal of Asian Economics, Elsevier, vol. 16(1), pages 105-124, February.
    5. Becker, Bettina & Hall, Stephen G., 2009. "How far from the Euro Area? Measuring convergence of inflation rates in Eastern Europe," Economic Modelling, Elsevier, vol. 26(4), pages 788-798, July.

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