Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64490
Authors: 
Aizenman, Joshua
Year of Publication: 
2012
Series/Report no.: 
Working Papers, UC Santa Cruz Economics Department 699
Abstract: 
This paper analyzes reforms and adjustments in the context of the Euro and the global financial crises. Taking the perspective of the evolutionary approach to institutions, the formation of a new currency area is not unidirectional. The process leading to the euro is an example of a common upbeat and optimistic attitude to the formation of new institutions. Such a Panglossian attitude to policies may reflect built-in fiscal myopia, possibly both at the level of the principal [the policy maker] and of the agents [consumers and households]. Next, the paper reviews the evolution of institutions buffering the stability of unions in the aftermath of crises, where fiscal restraints and the allocation of significant bargaining clout to the Federal Center increase the stability of a union. The paper concludes with an overview of the challenges associated with finding the proper balance between financial integration and financial regulations.
Subjects: 
currency unions
financial regulations
financial reforms
evolutionary approach to institutions
JEL: 
F02
F33
F34
F42
Document Type: 
Working Paper

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