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Have a Break, Have a ... National Currency: When Do Monetary Unions Fall Apart?

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  • Volker Nitsch

Abstract

Historically, dissolutions of currency unions are not unusual. I use an annual panel data set covering 245 country pairs that use a common currency (of which 128 are dissolved) from 1948 through 1997 to characterize currency union exits. I find that departures from a currency union tend to occur when there is a large inflation differential between member countries, when the currency union involves a country which is closed to international trade and trade flows dry up, and when there is a change in the political status of a member. In general, however, macroeconomic factors have only little predictive power for currency union dissolutions.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1113.

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Date of creation: 2004
Date of revision:
Handle: RePEc:ces:ceswps:_1113

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Keywords: monetary union; sovereign currency; dissolution; exit;

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References

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  1. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
  2. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  3. Roberto Chang & Andres Velasco, 2002. "Dollarization: Analytical Issues," NBER Working Papers 8838, National Bureau of Economic Research, Inc.
  4. Paolo Mauro & Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes," IMF Working Papers 02/104, International Monetary Fund.
  5. Andrew K. Rose & Charles Engel, 2000. "Currency Unions and International Integration," NBER Working Papers 7872, National Bureau of Economic Research, Inc.
  6. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 97/79, International Monetary Fund.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. La prevalenza del declino
    by Alberto Bagnai in Goofynomics on 2013-02-16 18:13:00
  2. Debito pubblico: quelli che ‘la monetizzazione si fa coi miniassegni…’
    by Alberto Bagnai in Il Fatto Quotidiano on 2014-04-08 06:52:45
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Cited by:
  1. Bettina Becker & Stephen G. Hall, 2009. "How Far From the Euro Area? Measuring Convergence of Inflation Rates in Eastern Europe," Discussion Paper Series 2009_05, Department of Economics, Loughborough University, revised Mar 2009.

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