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The Sustainability of Monetary Unions. Can the Euro Survive?

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Abstract

This paper aims to propose a new measure of exchange market pressure for countries operating in hard peg regimes, such as currency unions, currency boards or full dollarization. We use a general model of currency crisis to derive a sustainability index based upon the relationship between the shadow exchange rate and the output gap required to maintain the currency peg. We apply the new index to European Union countries in order to assess the sustainability of the Euro.

Suggested Citation

  • Paolo Canofari & Giancarlo Marini & Giovanni Piersanti, 2012. "The Sustainability of Monetary Unions. Can the Euro Survive?," CEIS Research Paper 226, Tor Vergata University, CEIS, revised 27 Mar 2012.
    • Handle: RePEc:rtv:ceisrp:226
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    17. Roel Beetsma & Massimo Giuliodori, 2010. "The Macroeconomic Costs and Benefits of the EMU and Other Monetary Unions: An Overview of Recent Research," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 603-641, September.
    18. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
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    Cited by:

    1. Paolo Canofari & Giancarlo Marini & Giovanni Piersanti, 2015. "Expectations and systemic risk in EMU government bond spreads," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 711-724, April.
    2. Paolo Canofari & Giovanni Bartolomeo & Giovanni Piersanti, 2014. "Theory and Practice of Contagion in Monetary Unions: Domino Effects in EMU Mediterranean Countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 20(3), pages 259-267, August.
    3. Canofari Paolo & Di Bartolomeo Giovanni & Piersanti Giovanni, 2013. "Theory and practice of contagion in monetary unions. Domino effects in EU Mediterranean countries: The case of Greece, Italy and Spain," wp.comunite 0098, Department of Communication, University of Teramo.
    4. Mariam A. Voskanyan, 2018. "Assessment of Prospects for Currency Integration Between Armenia and Russia," Journal of New Economy, Ural State University of Economics, vol. 19(5), pages 16-31, October.

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    More about this item

    Keywords

    shadow exchange rate; currency crisis; exchange market pressure;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

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