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The Bail-Out! Positive Political Economics Of Greek-Type Crises In The Emu

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  • CHRISTIAN FAHRHOLZ

    ()
    (School of Economics and Business Administration and Graduate Program, "Global Financial Markets", Friedrich-Schiller-University, Jena, Carl-Zeiss-Strasse 3, D-07743 Jena, Germany)

  • CEZARY WÓJCIK

    ()
    (Polish Academy of Sciences and Warsaw School of Economics, Al. Niepodległości 164, 02-554 Warsaw, Poland)

Abstract

The Greek bail-out was highly controversial. An oft-heard assessment is that (i) the bail-out was a mistake, (ii) the political haggling over it was irrational. Contrary to this view, our analysis suggests that, given EMU's present political-economic set-up, (i) the bail-out was unavoidable and (ii) the lengthy process of political haggling leading to it was understandable. We have based our analysis on a political-economic, game-theoretic model that helps to understand why and how the parties involved in the Greek crisis arrived at the bail-out and on what conditions the final solution depended.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Journal of International Commerce, Economics and Policy.

Volume (Year): 03 (2012)
Issue (Month): 02 ()
Pages: 1250010-1-1250010-18

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Handle: RePEc:wsi:jicepx:v:03:y:2012:i:02:p:1250010-1-1250010-18

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Related research

Keywords: Bail-out; negative externality; political economics; game theory; euro; EMU; JEL Classifications: E62; JEL Classifications: F33; JEL Classifications: H77; JEL Classifications: C70;

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References

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  1. Ludger Schuknecht & Albert Jaeger, 2004. "Boom-Bust Phases in Asset Prices and Fiscal Policy Behavior," IMF Working Papers 04/54, International Monetary Fund.
  2. Jonas Fischer & Lars Jonung & Martin Larch, 2007. "101 Proposals to reform the Stability and Growth Pact. Why so many? A Survey," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 267, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  3. Buti, Marco & Sapir, André, 2006. "Fiscal Policy in Europe: The Past and Future of EMU Rules from the Perspective of Musgrave and Buchanan," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5830, C.E.P.R. Discussion Papers.
  4. Jakob de Haan & Helge Berger & David-Jan Jansen, 2004. "Why has the Stability and Growth Pact Failed?," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 7(2), pages 235-260, 07.
  5. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, Econometric Society, vol. 21(1), pages 128-140, April.
  6. Konstantin Sonin, 2008. "A Theory of Brinkmanship, Conflicts, and Commitments," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 24(1), pages 163-183, May.
  7. Riccardo Faini, 2006. "Fiscal policy and interest rates in Europe," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 21(47), pages 443-489, 07.
  8. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, Econometric Society, vol. 18(2), pages 155-162, April.
  9. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
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Cited by:
  1. May Elsayyad & Kai A. Konrad, 2011. "Fighting Multiple Tax Havens," Working Papers, Max Planck Institute for Tax Law and Public Finance fighting_multiple_tax_hav, Max Planck Institute for Tax Law and Public Finance.
  2. Christian Fahrholz & Andreas Freytag, 2012. "A Way to Solve the Euro pean Balance of Payments Crisis? Take a Chance on Market Solutions!," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 13(SPECIALIS), pages 77-82, 02.
  3. Christian Fahrholz & Cezary Wójcik, 2012. "The Eurozone Needs Exit Rules," CESifo Working Paper Series 3845, CESifo Group Munich.
  4. Christian Fahrholz & Andreas Freytag, 2011. "Ein Lösungsweg für die europäische Zahlungsbilanzkrise? Mehr Markt wagen!," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(16), pages 73-78, 09.
  5. Wolfgang Schäuble & Jürgen Stark & Clemens Fuest & Christian Fahrholz & Michael Eilfort & Verena Mertins, 2011. "EU-Rettungsschirm: Folgt der Einstieg in eine Transferunion?," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 64(03), pages 03-20, 02.

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