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Leaving EMU: a real options perspective

Author

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  • Frank Strobel

Abstract

The real option implicit in a country's decision of whether to leave an existing monetary union when there is uncertainty over the future benefits of this move is examined. The theoretical model used is calibrated for the current Euro-12 area by proxying policymakers’ inflation preferences with unemployment rates and debt-to-GDP ratios. A robust group of countries is observed that would choose to remain within EMU consisting of Belgium, Finland, Greece and Italy; France and Spain loosely also belong to this core. Only Luxembourg would robustly want to leave EMU; Ireland and The Netherlands, however, complement that core closely.

Suggested Citation

  • Frank Strobel, 2004. "Leaving EMU: a real options perspective," Discussion Papers 04-16, Department of Economics, University of Birmingham.
    • Handle: RePEc:bir:birmec:04-16
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    File URL: https://repec.cal.bham.ac.uk/pdf/04-16.pdf
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    More about this item

    Keywords

    EMU; real option; calibration;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance

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