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Title:Heterogeneous policy responses and the risk of monetary disintegration in Europe PDF Logo
Authors:Cornelius, Peter K.
Trimbur, Thomas
Issue Date:2000
Series/Report no.:Research notes in economics & statistics 00-1
Abstract:Leaving EMU would create great legal uncertainty and costly litigation and would hence involve extremely high costs for a country that has fully been euronized. Nevertheless, it is conceivable that these costs are not high enough to eliminate fully the risk of monetary disintegration in Europe. In assessing this risk, the paper distinguishes several exit scenarios, whereby particular emphasis is paid to the case where a country decides unilaterally to leave EMU either because of the lack of stabilization efforts in the rest of the union, or, in turn, due to union-wide stabilization efforts which are regarded as excessively ambitious. The empirical results suggest heterogeneous policy responses to macroeconomic strains, implying a non-trivial possibility of escalating tension among the EMU members.
Subjects:EMU
monetary disintegration
JEL:E42
Document Type:Working Paper
Appears in Collections:Research Notes, Deutsche Bank Research

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