Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/25616 
Year of Publication: 
2007
Series/Report no.: 
Jena Economic Research Papers No. 2007,050
Publisher: 
Friedrich Schiller University Jena and Max Planck Institute of Economics, Jena
Abstract: 
Following entrance into the European Union, Central Eastern European Countries (CEECs) are expected to join the European Monetary Union (EMU). These countries may incur considerable costs over the course of their passing through the required Exchange Rate Mechanism II (ERM-II). However, with enough bargaining leverage CEECs may be able to pass some of these costs on to current EMU-members. In turn, a CEEC’s leverage depends on their ability to wield successful brinkmanship via an exchange-rate policy characterized by a ‘threaten-thy-neighbor’ strategy. A two-stage Nash-threat game captures the essentials of the CEECs’ phase of ERM-II pass through.
Subjects: 
Threat game
Nash-bargaining solution
exchange-rate policy
EU-enlargement
EMU
JEL: 
C72
C78
F33
F51
Document Type: 
Working Paper

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